Mortgage RatesRegulatory

House Republicans struggle to control CFPB

Democrats say GOP wants "death by a thousand paper cuts"

The Subcommittee on Financial Institutions and Consumer Credit heard Wednesday from witnesses in a hearing on how to improve transparency and accountability at the Consumer Financial Protection Bureau.

The CFPB has been criticized for its lack of transparency and its lack of clarity in regulations and guidance. The CFPB has argued that it is not subject to the Federal Advisory Committee Act, a sunshine law passed in 1972.

However, days before the hearing, the CFPB relented and said it will open its advisory committees to the public now after resisting such efforts. 

Witnesses included Andrew Pincus, a partner with Mayer Brown; Hester Peirce, senior research fellow at the Mercatus Center at George Mason University; Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group, and Rob Chapman, president of the American Land Title Association.

Aside from the usual jockeying, grandstanding and prepared speeches disguised as question from committee members on both sides, the committee discussed a number of bills that would change how the CFPB does business.

The bills include:

  • H.R. 3389, the CFPB Slush Fund Elimination Act of 2013, which would eliminate the Bureau’s Civil Penalty Fund and requires the CFPB to remit fines it collects to the U.S. Treasury, and another that would create a separate, independent inspector general for the CFPB. The CFPB currently shares an inspector general with the Federal Reserve System.
  • The committee also considered H.R. 4262, the Bureau Advisory Commission Transparency Act that the FACA applies to the CFPB.
  • Bills would also create a small business advisory board for the CFPB, and another that would require that the CFPB research papers be made available to the public along with all studies, data, and analyses on which the paper was based.
  • In a nod to privacy concerns that have become so widespread since the government’s warrantless, electronic snooping on Americans was brought to light last year, there was also a bill that would require the CFPB to create an opt-out list for consumers who do not want the CFPB to collect personally identifiable information about them and to delete or destroy information about a particular consumer within a specified period of time following collection.
  • A discussion draft of the Bureau Arbitration Fairness Act would repeal the CFPB’s authority to prohibit, condition, or limit the use of arbitration provisions in contracts for consumer financial products or services.
  • There was also a discussion draft of the Bureau Guidance Transparency Act that would require that the CFPB, in issuing any guidance, provide a public notice and comment period before issuing the guidance in final form, and must make public any studies, data, and other analysis it relied on in preparing and issuing its guidance.
  • Another draft bill would require the CFPB to go through a formal rulemaking with public notice and comment in order to publish a final rule that gives clear guidance on the CFPB’s definition of an “abusive” act or practice; would enact a moratorium on any enforcement action using the CFPB’s “abusive” authority until the final rule is published; and would repeal the CPFB’s authority to prohibit “abusive” acts or practices if it fails to conform to specified rulemaking timelines.
  • Finally, there was a discussion draft of the Bureau Examination Fairness Act would prohibit the CFPB from including enforcement attorneys in examinations, regulate CFPB data requests during the course of examination, place time limitations on the completion of examination field work and the issuance of exam reports and supervisory letters, and prohibit concurrent limited-scope exams at the same institution.

Democrats on the subcommittee said opening the CFPB to more scrutiny and oversight would be burdensome, and said they would resist any Republican efforts to do so. They say the efforts are designed to defang the CFPB.

U.S. Rep. Carolyn Maloney, D-N.Y.

“Take all these together and it’s like death by a thousand cuts for the CFPB,” said U.S. Rep. Carolyn Maloney, D-N.Y.

Republicans said the CFPB needs to operate more like the SEC or FCC, and that the bureau’s actions and judgments are too arbitrary. They say the CFPB operates without proper oversight or limit on its authority.

To read the rest of the story, click below.

Pincus, asked about the regulatory and oversight burden the various bills would put on the CFPB, said it was no different than the burden on the rest of the government.

“These are practices that are routine for every other agency in the government,” Pincus answered.

“You seem to be arguing for the bad guys,” U.S. Rep. Keith Ellison, D-Minn., said to Pincus.

There was lengthy debate that the CFPB should not be asked to develop a definition of “abusive” – a term the CFPB commonly uses in its actions, but which it refuses to define, leaving it a largely blank check to write against business owners and entrepreneurs.

“This is ad hoc, after-the-fact rulemaking. It’s like saying we’re going to have a reasonable speed limit, but we’re not going to tell you what it is, but we’ll give you a ticket is you exceed it,” said U.S. Rep. Andy Barr, R-Ky.

The lack of clarity and oblique nature in CFPB rulemaking and enforcement also stifles innovation and attempts to provide new products to underserved markets, for fear the bureau will arbitrarily rule against such efforts.

On the issue of allowing citizens to opt-out of data collection by the CFPB, U.S. Rep. Sean Duffy, R-Wis., said he didn’t understand opposition to this measure.

“If the whole philosophy is consumer protection, why wouldn’t you allow consumers the protection to be able to opt-out of (personal) data gathering?” Duffy asked witnesses. “Why does the CFPB need to know someone’s religion to study markets?”

The National Association of Federal Credit Unions praised moves to open up the CFPB process.

“As you know, Members of Congress on both sides of the aisle have acknowledged that credit unions were not the cause of the financial crisis. While NAFCU has long recognized the need for additional consumer protection in the financial services arena, we were the first credit union trade association to oppose CFPB authority over credit unions given their record of member service and the existing laws and regulations they are subject to,” said Brad Thaler, vice president of legislative affairs for NAFCU.

“While NAFCU maintains that the CFPB should not have authority over credit unions, it has become clear through the rule writing and the examination processes that credit unions are firmly within reach of the new regulatory body,” he said. “Accordingly, NAFCU member credit unions and their 97 million member owners have a vested interest in ensuring the CFPB operates in a fair and transparent way.

NAFCU believes today’s hearing is an important one, as it is critical for the day-to-day operations of credit unions to have a clear understanding of how the CFPB operates.”

In particular, Thaler said that NAFCU is glad to see the consideration of the Bureau Advisory Commission Transparency Act that would ensure CFPB Credit Union Advisory Council meetings (and others) are open to the public and all minutes and reports are made available as detailed under the Federal Advisory Committee Act.

“We are pleased that, just this week, the CFPB announced that the Bureau was taking the first steps to accomplish this goal. NAFCU believes the Credit Union Advisory Council plays an important role in informing the CFPB how various rules and regulations would impact credit unions in practice, and encourages the CFPB to take these discussions into account throughout the rule making process” Thaler said.

“We applaud the CFPB for providing more transparency and responsiveness today by making its Board and Council meetings open to public,” Chapman said before the hearing. “We are very encouraged by the bureau’s actions to make the process more visible.  Additionally, we hope that this is also a positive step toward allowing small businesses, like the majority of ALTA’s membership, to have a seat at the table to offer advice and insight. It’s extremely important for the Bureau to hear directly from small businesses on emerging trends and practices and provide technical advice regarding the possible impact of any new regulation or rule.

“This is yet another reason for Congress to immediately pass H.R. 4383, which would create a small business advisory board at the CFPB,” Chapman said. “Advisory boards provide clear, formal and open channels of communications between Bureau staff and industry.”

 The Credit Union National Association said it endorses H.R. 3770, the CFPB-IG Act; H.R. 4383, the Bureau of Consumer Financial Protection Small Business Board Act; H.R. 4262, the Bureau Advisory Commission Transparency Act; and H.R. 4662, the Bureau Opinion Advisory Commission Act. 

Most Popular Articles

3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please