New Bill Would Create Commission to Oversee CFPB

A bipartisan group in Congress led by Dennis Ross (R- FL) is proposing a new bill (H.R. 5266) that would establish a five-member commission confirmed by the Senate to lead the Consumer Financial Protection Bureau (CFPB). The bill, co-sponsored by Reps. Krysten Sinema (D- AZ), David Scott (R- GA), and Ann Wagner (R- MO), would dispose of the single director management structure currently maintained by the CFPB.

The CFPB’s leadership structure has been the subject of considerable debate over the past few years. In late 2016, a three judge panel at the D.C. Circuit Court found the agency’s structure unconstitutional, explaining that the single director’s insulation from Congress and the President created an unlawfully powerful bureaucrat. The D.C. Circuit’s opinion noted: “The CFPB’s concentration of enormous executive power in a single, unaccountable, unchecked Director not only departs from settled historical practice, but also poses a far greater risk of arbitrary decisionmaking and abuse of power, and a far greater threat to individual liberty.” More recently, an en banc D.C. Circuit refused to declare the CFPB’s management structure unconstitutional, overturning the previous decision by the panel of judges.

With the departure of the CFPB’s maligned former director, Richard Cordray, the agency has been of the process of a major overhaul. Originally, the CFPB was bequeathed a single director that could only be fired “for cause” as a way to insulate the CFPB and its leadership from the corrupted influence of politicians and the powerful banking lobby. Going even further, Dodd-Frank shielded the Bureau from Congressional control by exempting it from appropriations and providing the agency a share of the Federal Reserve’s coffers. The result was an incredibly independent federal agency whose director is virtually answerable to no one.

A bipartisan commission in command of the consumer agency would put it in line with other independent regulatory agencies in the federal government, like the Federal Trade Commission and the Securities and Exchange Commission.

The Congressional Research Service (CRS) reported in 2017 on the characteristics, strengths, and weaknesses of independent federal agencies. When discussing single director v. board leadership structures, the CRS noted boards allowed for a diversity of views and were less likely to be tainted by the partisan reflections of the President.

The CRS recognizes that politics cannot be entirely removed from agency leadership, but more balanced boards lead to consensus-building and ultimately more regulatory consistency. While the deficiencies in the CFPB may or may not be improved with a change in managerial structure, there is no doubt that industry participants do not benefit from the current uncertainty clouding the agency’s leadership.

In speaking on the bill, the CEO and President of the Consumer Bankers Association, Richard Hunt, said,

“It is beyond comprehension to give a single director nearly unilateral authority over every consumer and financial institution in the country. We applaud this bipartisan solution establishing a Senate-confirmed, bipartisan commission – like nearly all other regulatory agencies in the country – to bring greater stability and balance to the CFPB. A commission prevents the regulatory pendulum from swinging wildly back-and-forth every time a new person sits in the Oval Office and will help ensure the CFPB fulfills its mission of consumer protection.”