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Board Report: 2013-AE-B-008 July 1, 2013

Board Should Enhance Compliance with Small Entity Compliance Guide Requirements Contained in the Small Business Regulatory Enforcement Fairness Act of 1996

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Finding 1: Board Should Centralize Compliance Guide Processes

Overall, we found that the Board did not implement a consistent approach for developing small entity compliance guides. As a result, the Board has inconsistently created and updated guides, and the guides have inconsistent content. In our opinion, the Board can considerably improve its approach to ensure that its compliance guides consistently (1) explain the actions a small entity should take to comply with the corresponding final rules and (2) enable a small entity to know when such requirements have been satisfied. We attribute inconsistencies among the guides to the Board's decentralized process for developing the compliance guides. Without a consistent, centralized approach for small entity compliance guides, the Board risks not meeting SBREFA's substantive content requirements and small entities may not be consistently receiving effective guidance on how to comply with applicable regulations.

Inconsistent Approach to Determining When to Create Compliance Guides

In general, our results indicate that the Board follows an inconsistent approach to determining when to create a small entity compliance guide. This inconsistent approach may be partly attributable to the fact that the responsibility for creating a compliance guide generally resides with the division that leads the rulemaking. For example, the Board's Division of Consumer and Community Affairs (DCCA) is primarily responsible for consumer-based regulations.

Although the FRFA performed by the Board for each rule within our sample indicated whether the rule would have a significant economic impact on a substantial number of small entities, guides were not created consistent with the FRFA results.11 For example, the Board's FRFA for a final rule amending Regulation GG, Prohibition on Funding of Unlawful Internet Gambling, indicated that the final rule would not have a significant impact on small entities.12 Yet, the Board published a Regulation GG compliance guide that explained the final rule. In other instances, the Board determined through FRFAs that the final rules that amended Regulation Z, Truth in Lending; Regulation AA, Unfair or Deceptive Acts of Practices; and Regulation E, Electronic Fund Transfers would have a significant economic impact on a substantial number of small entities. However, the Board did not update the overarching regulations' previously issued guides.13 Creating a Regulation GG compliance guide but not updating the other compliance guides when those rules had an economic impact on a substantial number of small entities reflects the Board's inconsistent approach.

Further, the Board has a decentralized process for overseeing the process of distributing the compliance guides. After a guide has been created, the Board does not follow a standard distribution protocol; guides may be distributed directly to industry contacts or they may only be posted to the Board's public website.

Varying Levels of Consistency among Compliance Guides

The guides we sampled evidenced varying levels of consistency in satisfying SBREFA's substantive content requirements for compliance guides. Our analysis also revealed varying approaches used to draft the guides, ranging from a section-by-section summary that merely restates the rule's requirements to a more comprehensive narrative approach that clearly communicates in a readily understandable manner what a small entity needs to do to comply.

For example, although the compliance guide for Regulation GG, drafted by the Legal Division, specifies what is required for entities covered by the rule, DCCA indicated that it generally prefers to produce section-by-section summaries because the Official Staff Interpretation accompanying consumer regulations provides exhaustive guidance on those regulations. However, the section of the Board's public website containing compliance guides only links to the relevant Official Staff Interpretation in 2 of 10 instances in which the Official Staff Interpretation might serve as a useful supplement to the section-by-section summary. Official Staff Interpretations notwithstanding, we believe that the DCCA guides we assessed do not adequately explain (1) the actions a small entity is required to take to comply with a rule or (2) how a small entity can be sure that it has satisfied compliance requirements.

As part of our evaluation, we reviewed another agency's process for creating compliance guides. The agency issued guidance on how to comply with SBREFA's small entity compliance guide requirements. While the guidance acknowledged that SBREFA allows for broad discretion with regard to implementing compliance guide requirements, the agency provided a general template for small entity compliance guides that identified the types or categories of small entities subject to the guide, summarized the new regulation, outlined compliance dates for notifications and other requirements, and provided examples of questions that may be appropriate to address in the compliance guide.

While SBREFA allows for broad discretion to satisfy compliance guide requirements, the Board's section-by-section summaries did not address questions that may have assisted small entities in comprehending applicable requirements. For illustrative purposes, the other agency we reviewed, which is subject to the same requirements, recommends that the agency's rule writers address the following questions when drafting a small entity compliance guide:

  • How can I tell if I am subject to the rule?
  • What requirements am I subject to?
  • When do I need to comply?
  • Where do I go for help?

The framework and guidance provided by the agency to its rule writers evidenced a consistent approach to developing small entity compliance guides.

Commendable Actions

As part of our evaluation, we reviewed two of the Board's compliance guides that could serve as models for future guides. The compliance guide for Regulation P, Privacy of Consumer Information, defines important terms used in the rule and explains the categories of information related to the rule. In addition, the compliance guide for Regulation GG clarifies which small entities are subject to the rule and what is required of businesses covered by the rule in a helpful question-and-answer format.14 Overall, these guides were comprehensive and addressed the applicability of the respective rule to small entities.


The Board's decentralized process for developing compliance guides contributes to the inconsistencies we observed among the guides we reviewed. In our opinion, centralized oversight would help ensure that the Board is meeting SBREFA requirements in a consistent manner, including (1) determining whether and when to create or update a guide and (2) confirming that the requirements for the guides have been satisfied.


We recommend that the Board

  1. Establish centralized oversight and a standard method or approach for creating small entity compliance guides.

Management's Response

The Board's General Counsel and the Director of the Division of Consumer and Community Affairs agreed with our recommendation. In the consolidated response to recommendation 1, the Board officials indicated their intent to adopt a consistent, centralized approach toward the preparation of small business compliance guides. This approach will "draw on the qualities" of the guides for Regulation P and Regulation GG highlighted in the Commendable Actions section above. The Board officials agreed to improve the overall usefulness of the small business compliance guides.

OIG Comment

In our opinion, the action described by the Board's General Counsel and Division Director is responsive to our recommendation. We plan to follow up on the Board's actions to ensure that the recommendation is fully addressed.

  • 11. Details on our scope and methodology are in appendix A, our final sample of rules reviewed is in appendix B, and the detailed results of our review are in appendix C.   Return to text
  • 12. According to an interviewee, the Board generally prefers not to certify that a final rule will not have a significant economic impact on a substantial number of small entities without conducting a regulatory flexibility analysis. In our opinion, this preference appears to result in uncertainty concerning whether a guide should be created because section 212(a)(1) of SBREFA makes the small business compliance guide requirement contingent on the agency's certification as to whether the rule, if promulgated, will have a significant economic impact on a substantial number of small entities.   Return to text
  • 13. On February 22, 2010, the final rule amending Regulation AA was withdrawn to avoid duplication and inconsistency with provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009.   Return to text
  • 14. The Board did not need to create a compliance guide for Regulation GG because the FRFA associated with the rule indicated that there would not be a significant impact on small entities.   Return to text