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CBA to Congress: “Reforms to CFPB Long Overdue”
March 9, 2023
In a new letter to the House Financial Services Subcommittee on Financial Institutions and Monetary Policy ahead of its hearing entitled “Consumer Financial Protection Bureau: Ripe for Reform,” the Consumer Bankers Association (CBA) outlined specific recommendations to reform the Consumer Financial Protection Bureau (CFPB).
In the letter, CBA President and CEO Lindsey Johnson highlighted concerns that must be addressed to ensure a safe and well-functioning financial services marketplace for consumers:
“Significant reforms to the CFPB are long overdue. Since its inception, the Bureau has been a political lightning rod, instead of a steady and consistent voice for consumer protection regulation and best practices expected from a world class regulator. Recently, creative messaging aimed to sway the court of public opinion – rather than informed regulatory decisions that have received input from all stakeholders – appears to guide the decision making at the Bureau, and its policy proclamations are often based on ideological preferences rather than on data and stakeholder feedback. This often creates confusion for providers of consumer financial services and the customers they serve.”
“Another worrisome trend at the Bureau is its willingness to establish new regulatory requirements for banks outside of the rulemaking process required by the Administrative Procedure Act while seeking minimal input from the industry it is responsible for overseeing. This is in stark contrast to the open dialogue that the banking industry experienced with multiple previous CFPB Directors, regardless of party affiliation. Furthermore, the Director’s nearly constant and public attacks on banks erode consumer confidence in the banking system and undermine efforts to bring more consumers into the highly regulated and time-tested depository intuitions the Bureau oversees.”
For these reasons, CBA endorsed several legislative proposals slated for discussion today:
- Replacing the current single leadership structure at the CFPB with a Senate-confirmed, bipartisan commission, which will “bring transparency and stability, and […] insulate this powerful regulator from political shifts that make it difficult for institutions to innovate new products and services and to meet consumers’ evolving needs.”
- Subjecting the CFPB to the annual Congressional appropriations process, which would, “not only compel the Bureau to begin taking oversight seriously– it would also provide Congress with ongoing opportunities to review and adjust the CFPB’s budget as needed so that it can appropriately regulate the products and services offered to consumers by financial service providers.”
- Requiring the CFPB to conduct a rigorous cost-benefit analysis as a part of the rulemaking process, which would ensure the benefits of policy changes outweigh the costs to consumers. Current law leaves the details of a cost-benefit analysis to the CFPB’s “discretion, often resulting in lopsided rules that may sound positive in concept but have damaging consequences.”
- Establishing an independent Inspector General (IG), separate from the existing IG at the Federal Reserve, which “would bring more accountability to the Bureau and provide Congress with important information on its internal operations.”
Notably, CBA also urged members of the Subcommittee to address the CFPB’s misuse of its “Unfair, Deceptive, or Abusive Acts or Practices” (UDAAP) authority, which “has created significant uncertainty in the financial services marketplace to the detriment of consumers and banks alike, and it raises profound substantive and procedural legal concerns.”
In fact, as Johnson explains, “the CFPB’s actions have left industry with little choice but to pursue legal correction of the issue. In September 2022, CBA and other trades filed a lawsuit challenging the CFPB’s position on several grounds, including the agency’s lack of statutory authority and failure to follow appropriate rulemaking procedures.”
Read the full letter HERE.
Read Lindsey Johnson’s RealClearMarkets op-ed, “Congress Should Get Head Start On CFPB Oversight and Reform,” HERE.