The Dodd-Frank Act, which established CFPB, grants the agency authority to develop rules aimed at protecting consumers in the financial products and services marketplace. In particular, the Dodd-Frank Act requires that CFPB consider the potential benefits and costs to consumers and covered persons, impacts of proposed rules on small banks and credit unions, and impact of proposed rules on consumers in rural areas. The act also requires CFPB to seek input from small entities during the rulemaking process for certain proposed rules. Specifically, when CFPB conducts a rulemaking that it determines will have a significant economic impact on a substantial number of small entities, CFPB must convene a SBREFA panel to seek direct input from small entities before issuing proposed rules for public comment, in addition to its normal rulemaking outreach to the public. This requirement extends beyond the typical rulemaking process, established under the Administrative Procedures Act, which encompasses the publication of most rules in the Federal Register and a period for public comment. The SBREFA panel requirement applies to CFPB, the Environmental Protection Agency, and the Occupational Safety and Health Administration. Once convened, the SBREFA panel has 60 days to solicit input from small entities on a draft proposal of a rule and report this input as well as its findings in a panel report. The Regulatory Flexibility Act, as amended by the Dodd-Frank Act, requires CFPB to consider the input of small entity representatives, which is reflected in the panel report, when drafting its proposed rule. See figure 1 for an overview of CFPB’s rulemaking process and the SBREFA panel process. The SBREFA panels are chaired by CFPB and include other government agency representatives from the Small Business Administration’s (SBA) Office of Advocacy and the Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs. Once CFPB has made the determination to convene a SBREFA panel, it must identify the appropriate number and mix of small entity representatives for the purpose of obtaining advice and recommendations from the individuals about the potential impacts of the proposed rule. These representatives are to be selected from small businesses, not-for-profit organizations, and government jurisdictions. Specifically, the Regulatory Flexibility Act, as amended by the Dodd-Frank Act, requires that CFPB identify these small entity representatives in consultation with the Chief Counsel for Advocacy of SBA. A small business must meet certain statutory definitions and SBA size standards to be eligible to participate in the SBREFA panel process. Before meeting with small entity representatives, CFPB, in collaboration with SBA’s Office of Advocacy and OMB’s Office of Information and Regulatory Affairs, develops an information package to share with small entity representatives. These materials typically contain information about the background and requirements for the proposed rule, an overview of the proposed rule (including a preliminary assessment of the potential impacts), and any alternatives under consideration, as presented by CFPB. CFPB also provides small entity representatives with an agenda and a list of potential discussion topics for the panel meeting, a fact sheet and other verbal and written information about their role in the process, and questions posed to small entity representatives on the impacts of the proposed rules for the meeting. CFPB officials also mentioned that they sometimes observed operations relevant to the rulemaking at a financial services organization. When CFPB convenes a SBREFA panel, the panel must assess certain impacts of proposed rules before their release for public comment as a Notice of Proposed Rulemaking. Accordingly, topics of discussion for the panel meeting with small business representatives address subject areas that CFPB is required to assess in its rulemakings. In particular, CFPB must prepare an Initial Regulatory Flexibility Analysis with the following required elements: a description and estimate, where feasible, of the number of small entities to which the proposed rule will apply; a description of the projected reporting, recordkeeping, and other compliance requirements of the proposed rule; an identification, to the extent practicable, of all relevant federal rules which may duplicate, overlap, or conflict with the proposed rule; a description of any significant alternatives to the proposed rule which accomplish the stated objectives of applicable statutes and which minimize any significant economic impact of the proposed rule on small entities; a description of any projected increase in the cost of credit for small entities (and, if so, any significant alternatives to the proposed rule that accomplish the stated objectives of applicable statutes and minimize any increase in the cost of credit for small entities); and a description of the advice and recommendations of representatives of small entities relating to the issues described above. Subsequent to the panel meeting with small entity representatives, the panel must prepare a report that summarizes the input of the small entity representatives and recommendations of the panel members. Accordingly, CFPB collaborates with SBA’s Office of Advocacy and OMB’s Office of Information and Regulatory Affairs to prepare the report, which is required to be completed within 60 days after the panel convenes. It is publicly released in conjunction with the release of the proposed rule as a Notice of Proposed Rulemaking in the Federal Register. Once the proposed rules are publicly released, another comment period is open to any interested parties, organizations, and the public in general. After the comment process is complete for a proposed rule and CFPB has decided to finalize the rule and continues to find that the proposed rule will have a significant economic impact on a substantial number of small entities, CFPB then must prepare a Final Regulatory Flexibility Analysis in conjunction with the final rule. This final analysis must include the following elements: description and estimate of the number of small entities to which the proposed rule will apply or an explanation of why no such estimate is available; description of the projected reporting, recordkeeping, and other compliance requirements of the proposed rule; description of the steps taken to minimize the significant economic impact on small entities consistent with the stated objectives of applicable statutes, including reasons for selecting the alternative adopted and rejecting other significant alternatives; and description of the steps taken to minimize any additional cost of credit for small entities. The Office of Inspector General (OIG) for the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau has reviewed certain aspects of CFPB’s rulemaking process, including the SBREFA panel process. In its September 2014 report, the OIG concluded that CFPB complied with Section 1100G of the Dodd-Frank Act in its operation of the SBREFA panels and rulemaking processes. The OIG also found that CFPB’s interim policies and procedures had been in use for approximately 2 years without being updated or finalized. The interim policies had afforded CFPB staff significant discretion in their rulemaking approach to regulatory analysis, which contributed to a variance in documentation and inconsistent knowledge transfer practices. At the time of the OIG review, CFPB used interim guidance to detail the agency’s rulemaking process, which included utilizing the SBREFA process as required under the Dodd-Frank Act. CFPB used the interim guidance in the development and issuance of the four rules we reviewed, all of which were published in the Federal Register as proposed rules for public comment prior to September 2014. The OIG made recommendations for CFPB to finalize its interim guidance documents and enhance data repository measures. CFPB finalized its internal guidance documents in 2014. As of March 2016, the OIG noted that CFPB had agreed with its recommendations. OIG staff also told us that corrective actions were underway and that the recommendations remained open as they awaited further documentation from CFPB to close out the recommendations, as of June 2016. CFPB, in collaboration with SBA’s Office of Advocacy and OMB’s Office of Information and Regulatory Affairs, accomplished required steps for conducting the four panels that we reviewed—including soliciting the input of small entity representatives at panel meetings. In addition, before the panel discussions CFPB worked with SBA’s Office of Advocacy to identify and select candidates to be small entity representatives. CFPB, SBA’s Office of Advocacy, and OMB’s Office of Information and Regulatory Affairs also worked collaboratively to develop and send materials to small entity representatives before panel meetings. The materials included information on the draft proposed rule (with a preliminary assessment of the potential impacts), discussion questions, and the SBREFA process. Based on our analysis of testimonial and documentary evidence, we found evidence of collaboration between CFPB and SBA’s Office of Advocacy concerning the selection of small entity representatives. In doing so, we noted that different representatives appeared in each of the four panels. We also found that CFPB worked with trade associations to identify potential candidates for small entity representatives and further vetted organizations to help ensure that a variety of entity types were represented at the panel meeting, including those of varying sizes and from different geographic areas. The time frames afforded to small entity representatives to provide input before panel meetings generally increased over time (see fig. 2). CFPB’s actions occurred within the context of a Regulatory Flexibility Act requirement, to complete panel reports 60 calendar days after the panels were convened. CFPB defines “convened” as the date on which CFPB, SBA’s Office of Advocacy, and OMB’s Office of Information and Regulatory Affairs formally established the panel, not the date on which the panel meeting with small entity representatives occurred. In earlier panels, CFPB either convened the panels shortly before providing representatives with materials or concurrently. Then, representatives had from 10 to 11 business days to review materials before panel meetings. For the most recently completed panel we reviewed (HMDA), CFPB first sent out materials and allowed 18 business days for representatives to provide input before the panel meeting.