Understanding Laws, Regulations, and Regulatory Guidance
Laws Versus Regulations
A law, often called a statute, is enacted by a legislative body. At the federal level, Congress passes laws that are generally codified in the United States Code. At the state level, legislatures enact statutes that become part of their respective state codes.
Statutes establish legal requirements, prohibitions, rights, and responsibilities. They may also give government agencies authority to administer or enforce the law.
However, statutes generally do not address every detail needed to put a law into practice. Instead, they may authorize or direct a government agency to adopt regulations, also called rules, that implement the law. Federal regulations are generally published in the Code of Federal Regulations (CFR).
For example:
Congress enacted the Truth in Lending Act (TILA). Regulation Z implements TILA and provides more detailed requirements governing areas such as mortgage disclosures and advertising.
This distinction is important in mortgage compliance:
Statute = the underlying law enacted by the legislature
Regulation = the legally binding rules implementing that law
In practice, compliance professionals often work more directly with regulations because they provide the detailed standards needed to determine how a law applies to a particular advertisement, product, disclosure, or business practice.
The Limits of Regulatory Authority
An agency’s rulemaking authority is not unlimited. Federal agencies derive their authority from Congress, while state agencies receive authority from their respective state legislatures.
A regulation must therefore be based on authority granted by the governing statute and remain within the boundaries of that authority. An agency cannot use a regulation to rewrite a statute or create requirements beyond the authority granted by the legislature.
That does not mean regulations simply repeat statutory language. Regulations may:
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Interpret statutory terms
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Fill gaps in the law
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Establish procedures
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Define standards
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Provide operational details needed to implement the law
As a result, a regulation may be considerably more detailed than the statute it implements. If a regulation conflicts with the governing statute or exceeds the agency’s statutory authority, however, it may be subject to judicial challenge.
Where Regulatory Guidance Fits
Regulatory guidance is different from both statutes and regulations.
Agencies frequently publish official interpretations, commentary, examination manuals, compliance guides, advisory opinions, bulletins, FAQs, enforcement materials, and other resources explaining how they interpret or apply laws and regulations.
This guidance can be extremely important when evaluating compliance requirements and regulatory risk. However, guidance should not automatically be treated as having the same legal status as a statute or duly promulgated regulation.
The legal weight of guidance depends on the type of guidance, the authority under which it was issued, and how it is being applied.