Funding for CFPB may not be sufficient, Bullard says
Funding for the Consumer Financial Protection Bureau is projected to reach $500 million, but that may not be enough according to James Bullard, president of the Federal Reserve Bank of St. Louis. He gave the opening remarks Monday at the fourth and final panel discussion in a series about the CFPB. Bullard said he is concerned about the method of funding for the bureau. As mandated in the sweeping reforms of Dodd-Frank, the Federal Reserve will supply the equivalent of 10% of its expenses to the formation of the CFPB through the first year. That percentage increases to 11% in 2012 and to 12% every year thereafter — an estimated $500 million. Bullard said this may not be sufficient because the amount of money allocated in the law "is not based on any careful assessment of what the needs of the bureau will be" as it carries out its duties under Dodd-Frank. Among the tasks of the CFPB is an examination of all U.S. banks with $10 billion or more in total assets to make sure they are in compliance with new consumer protection rules and regulations. This, Bullard believes, will spill over into regulation of other financial institutions and assets not held in one of the 82 banks with assets exceeding $10 million. "In addition to banks, the bureau’s rule-writing authority will extend to institutions that have not historically fallen under federal oversight," Bullard said. "These institutions will include check cashers, payday lenders, money transmitters, pawn shops and other entities that are viewed as part of the 'shadow' network of consumer credit." This 'shadow' network coupled with the impending July deadline to have all regulations under the CFPB in place is no small task. Bullard is also concerned that this funding plan cannot be changed going forward, should market conditions change or if the bureau needs a change. However, Sandra Braunstein, director of consumer and community affairs at the Fed, said the Fed can go to Congress for an additional $200 million if the funds come up short. Write to Christine Ricciardi.