House Financial Services Committee approves bills to reform CFPB
The House Financial Services Committee approved three bills Friday that aim to change how and when the Consumer Financial Protection Bureau takes a leadership role in safeguarding consumers and enforcing financial regulations. If these bills pass the full House, regulators likely will enter gridlock over the issue. Washington think tank MF Global believes it is unlikely legislation to reform the agency will pass in the Senate. The CFPB is scheduled to launch July 21, as stipulated by the Dodd-Frank Act. But less than two months out, there is no nomination for director. Representatives in favor of the bills said the CFPB is flawed in structure and needs reforming in order to function adequately in the U.S. economy. "Rarely have I seen the creation of a bureau that I believe is more anti-consumer than the one created under the Dodd-Frank Act," said Rep. Jeb Hensarling (R-Texas). "You do not protect consumers by taking away their informed choices." However, those in opposition of the movement to reform the CFPB claim it is the only agency that will truly protect consumers. "The fact is that the CFPB is going to be wedged into regulators who are extremely jealous of jurisdiction," said Rep. George Miller (D-Calif.). "But other regulators didn't do squat to protect consumers and that's how we got in this situation." Members from both the Treasury and the Federal Deposit Insurance Corp. have expressed support for the CFPB. FDIC Chairman Sheila Bair recently told community bankers that many community banks lost significant market share to mortgage originators who were not accountable to consumer protections. "But we're gaining market share again now," Bair said. "That's what we need, and it will be an important value added." "The CFPB implementation team is off to a very strong start," said Deputy Treasury Secretary Neal Wolin in testimony before the Senate Banking Committee, "making sure they're putting in rules that are clear and making sure they're adhered to by not only banks but nonbanking financial institutions." Rep. Spencer Bachus (R-Ala.) introduced the Responsible Consumer Financial Protection Regulations Act of 2001 (H.R. 1121), which would establish a five-member commission to govern the CFPB instead of one director. The second bill was introduced by Rep. Sean Duffy (R-Wis.) and would make it easier for the Financial Stability Oversight Council to overturn rules made by the CFPB. It's called the Consumer Financial Protection Safety and Soundness Act or H.R. 1315. The last bill, the Bureau of Consumer Financial Protection Transfer Clarification Act (H.R. 1667), introduced by Rep. Shelley Capito (R-W.V.), would delay the entire agency from operation until a director is confirmed by the Senate. Consumers groups oppose the bills, as they believe the legislation threatens the agency's oversight and aims to weaken the CFPB. Pamela Banks, senior policy counsel for Consumers Union, said the legislation undermines the CFPB's ability to rein in abusive financial practices such as hidden bank fees, shady loans and other financial ripoffs. "Congress shouldn't put this new consumer watchdog on a short leash," Banks said with regard to the bills. "American families have already paid a steep price for years of lax federal oversight of abusive financial practices." Write to Christine Ricciardi. Follow her on Twitter @HWnewbieCR.