Four highlights from last week’s regulatory practice include unsurprisingly swings in money issues and engagement in one of the most emotional topics for any regulatory. The Consumer Financial Protection Bureau (CFPB) took steps to rein in arbitration clauses in consumer financial services contracts. The Department of Homeland Security (DHS) proposed substantial increases in citizenship and immigration services fees (and the Department of State (DOS) will shortly proposed to adjust consular services fees). Third, the Federal Register today includes a potentially most contentions proposed rule – the intersection between mental health and the right to bear arms. Finally, among the ongoing host of Obamacare regulations, the Department of Health and Human Services (HHS) stretches the good cause exception to advance notice and an opportunity for public comment.
Consumer Class Non-Arbitration: The CFPB released its draft proposed Arbitration Agreements rule on Thursday and will accept public comments for 90 days after the as-yet-unscheduled publication in the Federal Register. The CFPB, under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), conducted a study and published a report on consumer arbitration agreements and operations, and now proposes:
- to prohibit most consumer financial products and services providers from using arbitration clauses in contract terms that prohibit class action suits, and
- to require most providers involved in arbitration under existing contracts to submit specified arbitration records to the CFPB.
Dodd-Frank specifically authorizes the CFPB, by regulation, to prohibit or impose conditions or limitations on the use of arbitration clauses in regulated agreements, if the CFPB that such a prohibition or limitation is in the “public interest” and “for the protection of consumers.” Dodd-Frank makes a silent but specific exception from the Federal Arbitration Act (FAA) favor of arbitration for dispute resolution.
► The only surprise here is that the CFPB took more than five years to complete the study and propose a rule. The CFPB has at least been transparent in its past contempt for arbitration clauses. The proposed rule will draw an avalanche of comments, some of which may be useful, but the CFPB is unlikely to change its judgment on the proposed rule. The CFPB’s approach appears less nuanced than a return swing of the political pendulum. If the CFPB adopts the proposed rule as final, litigation is likely to focus on whether the CFPB had substantial evidence for the conclusions of its condition precedent study and report, thereby rendering a rule arbitrary and capricious, or an abuse of discretion.
Citizenship and Immigration Fees: The DHS published proposed amendments to its U.S. Citizenship and Immigration Services Fee Schedule last Thursday. The proposed rule would adjust the fees paid for services rendered by United States Citizenship and Immigration Services (USCIS), and a pro rata share of certain statutory requirements, by an average increase of 21%. The proposed rule reflects changes over a nearly six-year period. The fees (unlike most fees) directly fund nearly the entire $3+ Billion USCIS operations under the Immigration and Nationality Act (INA). Public comments are due on July 5, 2016.
► The proposed dramatic increase in fees is due, at least in part, to the amount of time between fee reviews – here, six years. While some may think they have benefited from the delay, in reality, the government has provided a poorer quality of service than it projected.
The activity based costing (ABC) system and the policy decisions necessary to determine service baselines are always subject to review, but complaints that the “fees are too high” will and should fall on deaf ears. The policy issues arising under the INA, the Chief Financial Officers Act, the Independent Offices Appropriations Act, 1952, and OMB Circular A-25, and judicial interpretations, require careful analysis, not complaints that specific oxen are being gored.
Finally, just to be even-handed, the Office of Management and Budget (OMB) last Wednesday completed executive and interagency review of a proposed Department of State (DOS) rule to alter the fees charged for consular services. Any operation that either operates exclusively on fees, or must collect fees for services and hand them over to the Treasury as miscellaneous receipts, must review the fee base at least every two years and adjust fees more frequently just to maintain current services.
Mental Competency for Firearms: The Social Security Administration (SSA) proposed Thursday to provide certain disability insurance and supplemental security income records to the Attorney General for inclusion in the Federal Bureau of Investigation (FBI)’s National Instant Criminal Background Check System (NICS) to bar such persons from possessing, purchasing, or receiving firearms or ammunition. The Implementation of the NICS Improvement Amendments Act of 2007 proposed rule requires adjudication for relevant SSA benefits under existing mental health definitions (including before an Administrative Law Judge (ALJ)) and more, prior to SSA providing an individual’s name and other identifying information. Existing law bars a person adjudicated incompetent under specific terms from possessing a firearm. The proposed rule provides for notice of the potential provision of information to the Attorney General at the beginning of the SSA benefits adjudication, as well as a process for relief from the bar through SSA adjudication of competency. Comments are due also on July 5, 2016.
► The proposed rule is notable for several reasons. First, the proposed rule is premised on a 2007 Act of Congress, and 2013 instructions from the President of the United States (POTUS) to the Department of Justice (DOJ) to provide agencies guidance and that guidance, on what information was to be supplied under that Act. The rule focuses extensively on the scope of SSA’s review and how it is narrowed under SSA’s regulations, but lacks a fair introduction to the detailed SSA adjudication process. The proposed rule will stir many public comments because both subject matters – firearms and mental health – may be the hotly debated, and, together, can be volatile. Read carefully, comment without emotion.
Health COOP Exceptionalism: Late Friday, the Office of the Federal Register filed for public inspection an HHS Patient Protection and Affordable Care Act; Amendments to Special Enrollment Periods and the Consumer Operated and Oriented Plan Program interim final rule (IFR). The rule alters the eligibility requirements for the special enrollment periods for individuals who, for example, permanently move to a State with an Obamacare (Patient Protection and Affordable Care Act or PPACA) qualifying exchange program to make an enrollment period available only to those individuals who had minimum essential coverage prior to their permanent move. The IFR also makes changes in the governing regulations for consumer operated and oriented plans (CO-OPs) and risks that appear unrelated to the enrollment periods.
HHS argues that the technical change aligns with the intent of the program. HHS argues also that delaying promulgation until after public comments is impracticable and contrary to the public interest under the Administrative Procedure Act (APA). The rule will be published May 11, comments (for what they may be worth) will be due by 5:00 PM EDT on July 5.
► HHS is at pains – and takes great pains but fails – to explain why an emergency exists requiring immediate action or that delay is contrary to the public interest in vetting proposed rules through the crucible of public comments. For example, HHS’s argument appears to focus on an “emergency” of HHS’ own making in its original regulations, regulations that appear to have resulted in a need “to guarding against adverse selection and gaming of the permanent move special enrollment period.” While narrowing the scope of the special enrollment periods may be a good idea, HHS may be misunderstanding “good idea” as sufficient public interest, while the APA requires that the public interest lies in not providing advance notice, such as to limit evasion of the law. HHS may be banking on yet another, unspoken and unacceptable, exception – that no one is likely to be able to effectively challenge HHS’s hodgepodge action.
The post Monday Morning Regulatory Review – 5/9/16: Consumer Class Non-Arbitration; Citizenship and Immigration Fees, Mental Competency for Firearms & Health COOP Exceptionalism appeared first on Federal Regulations Advisor.