CBA Statement for the Record - HFSC O&I Hearing re CFPB Structure

March 21, 2016



The Honorable Ann Wagner                                    


Subcommittee on Oversight and Investigations

Committee on Financial Services

U.S. House of Representatives

2129 Rayburn House Office Building

Washington, D.C.  20515                                                     

The Honorable Al Green

Ranking Member

Subcommittee on Oversight and Investigations

Committee on Financial Services

U.S. House of Representatives

4340 O’Neill House Office Building

Washington, D.C.  20151


Dear Chairman Wagner and Ranking Member Green:


The Consumer Bankers Association (CBA)[1] appreciates the Financial Services Subcommittee on Oversight and Investigations’ oversight of the Consumer Financial Protection Bureau (“Bureau” or “CFPB”) and its activities.  We would like to take this opportunity to submit the following comments and ask that they be submitted in to the record for the hearing entitled, “The Bureau of Consumer Financial Protection’s Unconstitutional Design.” 


The Consumer Financial Protection Bureau

In 2010, following the worst recession since the Great Depression, Congress passed the Dodd-Frank Act, which created the Consumer Financial Protection Bureau (CFPB).  The CFPB has unprecedented rulemaking, supervisory, and enforcement authority over the entire consumer financial services industry, and was created with a mission “to make markets for consumer financial products and services work for Americans.”[2]


By concentrating all of the consumer protection powers in one place, the CFPB has supervisory authority over more entities than all other Federal bank supervisors combined,[3] totaling 15,000 institutions altogether.  By contrast, the Office of the Comptroller of the Currency has supervisory authority over approximately 1,600 institutions.[4]  In addition to authority over each depository institution with assets over $10 billion, the CFPB has supervisory authority over all those in the business of origination, brokerage, or servicing of consumer loans secured by real estate, and related mortgage loan modification or foreclosure relief services; private education loans; and short term liquidity products.  Additionally, the agency has the ability to define, by rulemaking, its own scope of supervisory authority, which it has so far defined to include authority over larger consumer reporting agencies, debt collectors, nonbank student loan servicers, international money transmitters and nonbank auto finance companies.  Overall, the Bureau’s vast jurisdiction includes an entire sector of American finance from banks and credit unions, to innumerable financial services companies of all sizes, including larger participants in the American financial system, ultimately touching all Americans.


Since its inception, the CFPB was granted power by Congress to protect consumers, reduce discriminatory and predatory lending, and return dollars back to consumers by way of fines collected from enforcement actions. Unlike a majority of the financial service regulators, a single individual was tasked with the duties of directing such a vast and important endeavor.  With so much power vested in one person, it is prudent for Congress to reexamine the structure of the agency to ensure the Bureau’s design properly regulates the financial services industry, safeguards consumers, while permitting growth and innovation within our financial markets. 


As we know, the CFPB’s actions can have incredible ramifications on the financial industry and our economy.  This hearing serves the important purpose of examining the constitutionality of the agency and remedies to its structure which will ensure the longevity of the CFPB and its ability to protect consumers.  It is imperative the CFPB’s structure is stable, deliberative, and bipartisan – for the sake of the American consumer and the U.S. economy.


The PHH v. CFPB Case Has Created Greater Uncertainty

A recent U.S. Court of Appeals Case, PHH Corp. v. CFPB, examined the question of the CFPB’s constitutionality.  The opinion held that having a single director at the CFPB—an independent agency—who can only be removed by the President “for cause” puts too much power in the hands of a single individual, is a “gross departure from settled historical practice,” and is unconstitutional.  The court’s solution was to permit the President to remove the Bureau’s director “at will.” 


The court, however, noted that establishing a commission to lead the agency would be an alternative that would resolve the agency’s constitutional infirmities.  Judge Kavanaugh, the author of the opinion, stated, “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 decision making and abuse of power, and a far greater threat to individual liberty, than does a multi-member independent agency.”[5]


The U.S. Circuit Court for the District of Columbia has decided to rehear the case with the entire panel of judges (known as an en banc review) with oral arguments scheduled for May 24th.  It will take months more for the court to reach a decision.  


Need For a Bipartisan Commission

To preserve the CFPB as an effective regulator, with a mission to protect consumers regardless of which political party is in the White House, Congress should return the CFPB to its originally intended and planned structure, from a sole director to a bipartisan commission.  The PHH Corp. v. CFPB decision only exacerbates the need for a commission to eliminate the ongoing uncertainty posed by having a sole director. 


A bipartisan commission would provide a balanced and deliberative approach to supervision, regulation, and enforcement for the long-term as well as offer a stable form of leadership.  Certainty is not only good for industry, it is also good for consumers and the economy.  No matter the action or rule the Bureau considers, having multiple viewpoints that must be heard though a commission structure is more likely to strengthen consumer choice and increase consumer’s access to credit instead of one person’s opinion who may only solicit advice from a few select sources.


Another factor that calls into question the single director model, is the ever-changing political landscape.  Understanding that stability and certainty are two components of a healthy regulatory environment, a single director structure jeopardizes industry certainty, subjecting the financial services industry and consumers to the various and unpredictable political viewpoints that make it difficult for banks and credit unions to develop long-term plans so they can better serve consumers and small business.


In addition, a commission is the traditional and customary structure for independent federal agencies, helping to ensure thorough deliberation, bipartisanship, and impartiality.  Examples in the financial services space include the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the National Credit Union Administration.


Bipartisan Support for Commission Structure

The idea of a five-person commission has had bipartisan support and even originated in a Democrat-led Congress.  In 2009, then-Speaker Nancy Pelosi (D-CA) and then-House Financial Services Chairman Barney Frank (D-MA) led passage of legislation in the House, with strong Democratic support, which would have created a five-member commission to oversee the CFPB.  In addition, then-professor Elizabeth Warren, whose ideas led to the creation of the CFPB, also called for a Financial Product Safety Commission (FPSC) during public debate over the Agency’s creation – a proposal that was supported by President Obama.


In addition to Democratic support during the creation of the Dodd-Frank Act, a number of Republican led legislative efforts have attempted to replace the sole director model with a five-person commission.  In the 114th Congress, House Financial Services Committee Financial Institutions and Consumer Credit Subcommittee Chairman Randy Neugebauer (R-TX) introduced H.R. 1266, the Financial Product Safety Commission Act, modeled after the language that was originally included in the House-passed version of Dodd-Frank in 2009.  The House Financial Services Committee approved H.R. 1266 with bipartisan support in late September 2015.  Most recently, in September 2016, House Financial Services Committee Chairman Jeb Hensarling (R-TX) introduced H.R. 5983, the Financial CHOICE Act, which included the Neugebauer language, creating a commission at the CFPB.  In late September 2016, the Financial Services Committee passed the Financial CHOICE Act.



Improving the financial lives of consumers and the strength of small businesses is a goal we all share.  The best way to ensure this outcome is to establish a governance structure at the CFPB that promotes debate and deliberation among leaders with diverse experiences and expertise so rules and regulations are written for the financial betterment of consumers and small businesses.  A bipartisan commission of five, Senate-confirmed commissioners would provide a balanced and deliberative approach to supervision, regulation, and enforcement of rules and regulations that oversee the financial services sector.  Transitioning the CFPB’s governance structure to a bipartisan commission would ensure greater regulatory collaboration from all stakeholders culminating in the development of financial products that are safe, affordable and meet consumer demand.


CBA stands ready to work with Congress to craft a regulatory framework that safeguards the American consumer, ensures access to credit and promotes competition in the financial marketplace.  On behalf of the members of CBA, we appreciate the opportunity to submit this statement for the record. 




Richard Hunt

President and CEO

Consumer Bankers Association



[1] Founded in 1919, the Consumer Bankers Association is the trade association for today's leaders in retail banking - banking services geared toward consumers and small businesses. The nation's largest financial institutions, as well as many regional banks, are CBA corporate members, collectively holding well over half of the industry's total assets. CBA’s mission is to preserve and promote the retail banking industry as it strives to fulfill the financial needs of the American consumer and small business.

[2] Consumer Financial Protection Bureau, About Us,

[3] Financial Report of the Consumer Financial Protection Bureau, FY 2014.

[4]  The CFPB supervises compliance with consumer protection laws; the OCC’s supervisory authority includes prudential supervision and CRA for all national banks and federal thrifts, and consumer protection for national banks and federal thrifts with assets of $10 billion or less.

[5] PHH Corp. v. CFPB, No. 15-1177 (D.C. Circuit 2016).