Opinions Abound on the Future of the CFPB
As many wait anxiously for the en banc D.C. Circuit Court to rule on the constitutionality of the agency, there is no shortage of highly-respected industry leaders, former government officials, current members of Congress, and interest groups weighing in on the effectiveness and viability of the Consumer Financial Protection Bureau (CFPB).
Iain Murray, a British ex-pat, author of a book titled “Stealing You Blind: How Government Fat Cats Are Getting Rich Off of You,” and Vice President for Strategy for the non-profit policy organization Competitive Enterprise Institute (CEI), recently released a report chronicling the myriad of issues with the CFPB’s management of the consumer finance industry and offered recommendations on how to improve consumer outcomes. Murray lamented the lack of accountability at the agency, echoing the concerns put forth previously by a panel of D.C. Circuit judges that found the structure of the Bureau to be unconstitutional. The CEI report also keyed in on CFPB’s poor security practices with consumer data and privacy, attempts by the agency to regulate parties in areas where the Bureau is expressly prohibited from regulating (like auto dealers), and the CFPB’s overall “one-size fits all” approach to regulation. Murray concludes by recommending the agency be dissolved entirely and its authority returned to other federal financial regulators.
Earlier this week, staff for the House Committee on Financial Services (HFS) issued a report on various problems discovered reviewing the CFPB’s handling of the Wells Fargo scandal. The report found fault with the settlement amount secured by the agency, an amount totaling only 1% of staff expectations based on the severity of the bank’s offenses. HFS staff also criticized the CFPB for refusing to investigate Wells Fargo’s business practices further, especially in light of recent revelations that around 1.5 million more customers were affected by the scandal. CFPB Director Richard Cordray brushed off the report as nothing more than “Monday Morning Quarterbacking,” but the findings, based on internal agency communications, could reignite a push by the HFS Committee to hold Cordray in Contempt of Congress.
The Systemic Risk Council (SRC) is a private, non-partisan collection of former government banking officials, legal experts, and industry professionals gathered to address regulatory and structural risks in the global banking system. Membership in the SRC includes former Federal Reserve Chair Paul Volcker and the former Deputy Governor of the Bank of England, Sir Paul Tucker. The SRC released comments this week on U.S. Department of the Treasury’s June report on financial regulatory reforms. The SRC commented that, “the [Treasury] Report includes a number of worthwhile technical reforms and addresses important issues that are largely incidental to stability, but [is] concerned that some of the Report’s main recommendations would jeopardize the resilience of the financial system, the public finances and the welfare of citizens.” Some of the particular concerns of the Council focused on bank stress tests, leveraging ratios for large banks, and the objectivity of agency leaders on the Financial Stability Oversight Council. Absent from the SRC’s analysis was any mention of the CFPB, despite the Treasury report’s adoption of many of the provisions from CHOICE Act 2.0, legislation already passed in the House that would significantly alter the authority and structure of the CFPB.
With so many major players in industry and government weighing in on the future of the CFPB, it is hard to imagine the agency will look the same in the coming months. Rumors of Cordray leaving his post to run for governor of Ohio grow louder each week. The agency, and its agenda, could change considerably if any of these actors succeeds in pushing through their recommendations.
