In February, the CFPB announced the formation of a Small Business Review Panel as part of its initiative to combine the mortgage disclosures required by the Truth-in-Lending (TILA) and Real Estate Settlement Procedures Act (RESPA). The CFPB shared an outline of the proposals under consideration, a fact sheet summarizing the Small Business Review Panel process, and a list of questions and issues on which the CFPB would seek input. These materials offered terrific insight into the CFPB’s current thinking on the combined TILA-RESPA disclosures, but did you wonder why the CFPB developed the materials in the first place, and why they were directed at small entities?
Those of us who’ve been hanging around in the mortgage space for awhile may be only vaguely familiar with Small Business Review Panels. There’s a good reason for that: up until recently, only the Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA) were required to convene such panels as part of their rulemaking process. However, Section 1100 G of the Dodd-Frank Act (the Act) amended Section 609(d) of title 5, United States Code, to add the CFPB to the list of agencies that are “covered” by the so-called speed bump requirements of the Regulatory Flexibility Act. When any rule is planned that would have a significant economic impact on a substantial number of small entities, the Regulatory Flexibility Act requires the head of most federal agencies to ensure that small entities have been given an opportunity to participate in the rulemaking process. This is accomplished by the completion of an Initial Regulatory Flexibility Analysis, which examines the type and number of small entities potentially subject to the rule, recordkeeping and compliance requirements, and significant regulatory alternatives. Going forward, prior to publishing an Initial Regulatory Flexibility Analysis, the CFPB must convene a Small Business Review Panel, which is tasked with collecting advice and recommendations from representatives of small entities regarding the potential costs of proposed rules and recommended alternatives to those rules. These Small Business Review Panels will be convened by the CFPB to provide feedback and alternatives to rules the CFPB is considering. The feedback becomes part of the regulatory public record, so we all get to hear what the small businesses have to say.
Even if you’re not a small entity, consider reviewing the materials. They provide insight into the proposals being considered, which will give you insight into the likely impact on your business. Do you need to gather information so that you’re prepared to comment on the proposed rule when the time comes? Should you consider changes to your business model? Are you likely to need additional resources if the rules are similar to the proposals being considered? Forewarned is forearmed!