The investigative arm of Congress has agreed to consider whether curbs on leveraged loans set by US regulators should be subject to Congressional review, according to a letter seen by IFR.
Critics say the guidelines have put a crimp in bank loans to businesses, and Senator Pat Toomey asked the US Government Accountability Office for its opinion in March.
“GAO accepts your request as work that is within the scope of its authority,” the agency said Tuesday in a letter to Toomey, a redacted copy of which was obtained by IFR.
“Staff are available to begin the work shortly.”
Toomey wants the GAO to specify if the guidelines, issued by bank regulators after the financial crisis to curb risky loans, amount to a formal rule.
The distinction is critical because rules can be reviewed - and potentially voted down - by Congress under the Congressional Review Act of 1996.
Since President Donald Trump took office, Congressional Republicans have repeatedly used the CRA to overturn regulations.
The Federal Reserve, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency - the main US bank regulators - announced the lending guidelines in 2013.
Broadly they specify that loans should not be made to companies with a leverage ratio above six times or that are unable to pay down a significant portion of their debt quickly.
While the guidelines are not formal law per se, participants in the finance industry say any lending that flouts them invites the scrutiny - or worse - of the authorities.
Toomey asked the GAO for a decision by June 1, but the agency said it will take longer than that.
“We expect it will be at least a few months before the opinion is completed and issued,” GAO spokesman Chuck Young told IFR.
In a separate but virtually identical letter to the senator, the GAO also agreed to offer its opinion on whether a bulletin from the Consumer Financial Protection Bureau on indirect auto lending was also a formal rule.
That bulletin, also issued in 2013, essentially allows the CFPB to hold lenders that offer auto loans through dealerships responsible for discriminatory pricing.