In June, Steve Day, the president of the American Land Title Association (ALTA), testified in a hearing before the House Committee on Financial Services Subcommittee on Financial Institutions. It was the kind of Congressional hearing that probably didn’t get air time on C-SPAN, but it was pretty important to the land title insurance industry. That’s because Day was there to advocate for the passage of the “Give Useful Information to Define Effective (GUIDE) Compliance Act.”
Even before Mr. Day’s testimony, the GUIDE Act garnered some publicity because it was one of two proposals highlighted during ALTA’s annual Advocacy Summit in May when several hundreds of title industry professionals from all over the country descended on Capitol Hill to meet with legislators. Among those advocates was Lisa Steele, an executive vice president of Placer Title’s parent company, Mother Lode Holding Company. We thought it would be good to spotlight the proposal because outside of that ALTA event, the proposal has not garnered a lot of publicity.
What is the GUIDE Act?
The GUIDE Compliance Act (H.R. 5534) is a bill to require the Consumer Financial Protection Bureau (CFPB) to create an official process to clarify statutes or regulatory text and to inform the public about complex policy implementation topics. (We know the CFPB was technically renamed the Bureau of Consumer Financial Protection a little while ago, but the new name has yet to really catch on.) According to Day’s written testimony to the subcommittee, the bill requires the CFPB to:
- Issue guidance that is necessary or appropriate to carry out the purpose of the law it is responsible for, including facilitating compliance
- Publish in the Federal Register within one year of enactment the definitions, criteria, timelines and process for issuing each type of guidance the Bureau shall provide, with a final rule required within 18 months of enactment
- Allow industry to rely on guidance in good faith
- Establish a process and timeframes for requests for guidance, including time limits to provide answers in response to requests for guidance
- Create a process for amending or revoking guidance, including a process for public notice and comment
- Develop guidelines for determining the size of any civil money penalties
Bottom line is that this bill officially gives the CFPB responsibility that many in the industry already thinks it should have. Currently, sometimes the CFPB does these things, but it is never done in any consistent manner. If the law passes, there would be no more guessing game.
Why does the title industry support this bill?
To see why this bill is so important, you must look back to the times when Richard Cordray led the CFPB. Since its inception in 2011, the CFPB has been plagued with accusations that its structure is unconstitutional because of its unique autonomy it has from Congress and the President. The CFPB gets its budget from the Federal Reserve rather than Congressional appropriations and the President can only fire the Director for cause. With only one person in charge -- the director -- calling the shots rather than a full board of members, the CFPB had immense power to wield, and the title industry felt the pressure.
The CFPB often regulated by enforcement rather than guidance. It’s like a football kicker attempting a field goal, but having the referees move the goalposts to wherever they see fit while the ball is still in flight. Instead of offering specific guidance on how to follow CFPB rules, title companies were left to interpret specific enforcement actions against other companies and extract guidance from court rulings instead of directly from the CFPB. If passed, this proposal aims to fix that.
The need for change was most evident with the TILA-RESPA Integrated Disclosure (TRID) rule. While the CFPB did provide many forms of guidance for the new regulation, the 1,888-page rule sparked hundreds of questions from the title industry. The CFPB attempted to answer these questions through five webinars prior to the rules effective date, but the webinars explicitly stated that they did not offer official guidance.
The GUIDE Compliance act would ensure that every CFPB regulation would come with specific rules for the road, so that title companies don’t have to watch their counterparts face enforcement in order to learn how to run their own business.
Will it become law?
The bill was introduced in the House in April and immediately recommended to the Financial Institutions subcommittee. It’s unclear how likely it is to be passed by the committee. While there is no specific date set, the bill is expected to at least be discussed by the House Financial Services Committee in some way during the summer, according to industry observers.
Of course, even if the GUIDE Compliance Act passes committee it would still need to be approved by the full House, the Senate and the President. The proposal, which is sponsored by U.S. Rep. Sean Duffy (R-WI), garnered bipartisan support though. There are eight House Republicans and two House Democrats currently listed on the proposal as co-sponsors. Whatever happens, it’s certainly worth keeping tabs on.