“Speed Bump” provision could slow CFPB rule-writing process

The “speed bump” provision of the 2010 Dodd-Frank Act may cause additional rule-writing delays at the Consumer Financial Protection Bureau, allowing small financial institutions time to contest the new rules.

First enacted in 1996 under the Small Business Regulatory Enforcement Act, the legislation requires that the Environmental Protection Agency and the Occupational Safety and Health Administration organize a business review panel to analyze the costs and benefits of new rules as well as their alternatives, MicroBilt reports.

The 2010 Dodd-Frank Act, however, added the CFPB as the third agency subject to the “speed bump” review process. The CFPB will be required to analyze the possible impact of new rules on “cost of credit” for small financial firms. Throughout the review process, the business review panels will be able to suggest alternatives to the new rules in order to reduce increases to the cost of credit.

Once the CFPB proposes a rule that may have a significant effect on a large number of small financial firms, the agency is required to notify the Small Business Administration’s Office of Advocacy. The SBA will then make recommendations for a panel of small business representatives.

Though the CFPB is not required to follow the recommendations of the business panel, it must issue an explanation of the agency’s basis for rejecting or adopting the suggested alternatives. Historically, “speed bump” recommendations by business panels have often been adopted by the EPA and OSHA, indicating that the CFPB may favor adoption of the panel’s suggestions in the future.

The business panel review lasts on average between six and 10 months for OSHA and EPA rulemaking, but some experts say that the process can last longer. Some challenges to the “speed bump” review process include drawn-out deliberations and much disagreement between various parties regarding the potential impact of a rule. Business review panels may also find it difficult to identify the CFPB’s intentions and goals pertaining to the proposed rules, according to MicroBilt.

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