Politics & Money

Trump signs executive orders to curb “rulemaking in secret”

Will give companies more warning before major regulatory changes

President Donald Trump signed two executive orders Wednesday that seek to bring more transparency to the rulemaking process before new regulations are implemented.

The two executive orders, the Executive Order on Promoting the Rule of Law Through Transparency and Fairness in Civil Administrative Enforcement and Adjudication and the Executive Order on Promoting the Rule of Law Through Improved Agency Guidance Documents, will require more steps such as allowing for public input before a new regulation is implemented.

Trump explained he was signing the executive orders as part of his regulatory reduction campaign that he began when he took office.

This will cut back on the authority of rulemakers and give companies more notice before regulations are changed.

“For decades federal agencies have been issuing thousands of pages of so-called guidance documents, a pernicious kind of regulation imposed by unaccountable bureaucrats in the form on commentary on how rules should be interpreted,” Trump said as he signed the order. “All too often guidance documents are a back door for regulators to effectively change the laws and vastly expand their scope and reach. Guidance has frequently been used to subject U.S. citizens and businesses to arbitrary and sometimes abusive enforcement actions.”

One executive order states that the rule of law requires transparency, and regulated parties must know in advance the rules by which the federal government will judge their actions.

The Freedom of Information Act generally prohibits an agency from adversely affecting a person with a rule or policy that is not so published, except to the extent that the person has actual and timely notice of the terms of the rule or policy.

But this practice is not always followed by regulatory agencies.

Under former Consumer Financial Protection Bureau Director Richard Cordray, the bureau regularly practiced regulation by enforcement, which meant the CFPB would not draw the line in the sand for companies not to cross, but rather waited until companies did something to tell them it was wrong. The thought behind it was that if you drew a line in the sand, companies would edge as close as possible to the line without going over, whereas if regulations were kept vague, no one would even come close to crossing the line.

But that all ended under former CFPB Acting Director Mick Mulvaney and now CFPB Director Kathy Kraninger, who prefer to set clear boundaries on regulations.

From the executive order on the rule of law through transparency:

Agencies shall act transparently and fairly with respect to all affected parties, as outlined in this order, when engaged in civil administrative enforcement or adjudication.  No person should be subjected to a civil administrative enforcement action or adjudication absent prior public notice of both the enforcing agency’s jurisdiction over particular conduct and the legal standards applicable to that conduct.  Moreover, the Federal Government should, where feasible, foster greater private-sector cooperation in enforcement, promote information sharing with the private sector, and establish predictable outcomes for private conduct.  Agencies shall afford regulated parties the safeguards described in this order, above and beyond those that the courts have interpreted the Due Process Clause of the Fifth Amendment to the Constitution to impose.

The second executive order explained that, “Departments and agencies in the executive branch adopt regulations that impose legally binding requirements on the public even though, in our constitutional democracy, only Congress is vested with the legislative power.”

The second executive order stated that agencies should treat guidance documents as non-binding in both law and practice.

From the executive order:

Americans deserve an open and fair regulatory process that imposes new obligations on the public only when consistent with applicable law and after an agency follows appropriate procedures.  Therefore, it is the policy of the executive branch, to the extent consistent with applicable law, to require that agencies treat guidance documents as non-binding both in law and in practice, except as incorporated into a contract, take public input into account when appropriate in formulating guidance documents, and make guidance documents readily available to the public.  Agencies may impose legally binding requirements on the public only through regulations and on parties on a case-by-case basis through adjudications, and only after appropriate process, except as authorized by law or as incorporated into a contract.

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