Proposals to Reform CFPB by the U.S. House Financial Institutions and Monetary Policy Subcommittee
- Written by Steel Rose
The U.S. House Financial Institutions and Monetary Policy Subcommittee held a hearing entitled “Consumer Financial Protection Bureau [CFPB]: Ripe for Reform.” The memorandum released in advance stated the hearing would “examine the leadership structure, funding, budget, and operations of the CFPB and areas in which reforms are needed.” Predictably, during the hearings there was a partisan split on the proposed reforms, with Republican members attacking what they characterized as agency overreach in areas such as fee elimination and advocating drastic reforms up to total defunding, while Democratic members of the subcommittee largely supported the agency’s actions. In his opening statement, Chairman Andy Barr (R) explained why, in his opinion, reforms were needed and introduced a bill to do just that:
“[T]he CFPB operates outside of the congressional appropriations process, receiving its funding through the Federal Reserve (Fed), which also operates outside of the appropriations process, through an opaque formula. This denies Congress the use of its most powerful oversight tool — the ‘power of the purse.’ My bill, the Taking Account of Bureaucrats Spending Act, or the TABS Act, gives Congress back the power of the purse and its oversight power, reins in the unaccountable CFPB, and subjects the agency to the traditional appropriations process.”
Beyond the TABS Act, other reform bills discussed during the hearing included:
- The CFPB Dual Mandate and Economic Analysis Act.
- This bill would establish the Office of Economic Analysis in the CFPB to review all proposed and existing rules and regulations. Additionally, the purpose of the CFPB would be revised to include strengthening private sector participation in markets, without government interference or subsidies, to increase competition and enhance consumer choice.
- The CFPB–IG Reform Act.
- This bill would establish a separate Office of Inspector General for the CFPB.
- The Consumer Financial Protection Commission Act.
- This bill would remove the CFPB from being funded by the Fed, convert the CFPB into an independent commission, eliminate the positions of director and deputy director, and establish a five-person commission appointed by the President and confirmed by the Senate.
- Federal Reserve Loss Transparency Act.
- This bill would amend the Consumer Financial Protection Act of 2010 to prohibit the Fed from transferring money to fund the CFPB if the Federal Reserve Banks incur an operating loss, and amend the Federal Reserve Act to require the Fed to follow US GAAP.
Washington, March 9, 2023 -Today, the House Financial Services Subcommittee on Financial Institutions and Monetary Policy, led by Chairman Andy Barr (KY-06), is holding a hearing entitled, “Consumer Financial Protection Bureau: Ripe for Reform.” To read more click here.
Chairman Barr’s opening remarks as prepared for delivery:
“Thank you to our witnesses for joining us today in the Financial Institutions and Monetary Policy Subcommittee to discuss the administrative process fouls and structural issues that make the Consumer Financial Protection Bureau (CFPB) ripe for reform.
“Today’s hearing will examine: the agency’s leadership structure; current funding mechanism and how the agency manages its budget; operations that are in need of reform; and current tactics of ‘regulation without rules.’
“The CFPB does not have an executive board, an independent Inspector General (IG), or any true oversight of the director. This is unlike virtually every other federal agency.
“The agency is led by a single, partisan director, Rohit Chopra, who has routinely acted unilaterally and arbitrarily, often outside any statutory mandate, without engaging rulemaking in compliance with the Administrative Procedures Act (APA), and even sometimes without adjudication.
“This has led to the CFPB becoming the most unchecked, unaccountable agency in the whole Federal government.
“Further, the CFPB operates outside of the congressional appropriations process, receiving its funding through the Federal Reserve (Fed), which also operates outside of the appropriations process, through an opaque formula. This denies Congress the use of its most powerful oversight tool – the ‘power of the purse.’
“My bill, the Taking Account of Bureaucrats Spending Act, or the TABS Act, gives Congress back the power of the purse and its oversight power, reins in the unaccountable CFPB, and subjects the agency to the traditional appropriations process.
“Recently, the U.S. Court of Appeals for the Fifth Circuit held that the funding mechanism is unconstitutional, stating that it is ‘double insulated’ as the Fed and CFPB both operate outside of the congressional appropriations process. The Supreme Court will review the Fifth Circuit’s Decision this fall and has the opportunity to clarify the constitutionality of the CFPB’s funding once and for all.
“The TABS Act provides a commonsense solution for questions surrounding the funding mechanism and will put an end to bureaucratic overreach.
“Additionally, the Fed does not exercise authority over the CFPB in terms of its budget. Instead, the director is required to merely submit a short letter requesting funds each quarter that the director alone decides are ‘reasonably necessary’ for operations. The Fed rubber-stamps the request each time. This unchecked budget process allows for no accountability over the agency, which in turn permits the agency to stray from its core mission. This process must be reformed.
“Under Director Chopra, the CFPB has begun ‘regulating without rules’ by evading the traditional notice-and-comment process, instead regulating through enforcement, blog posts, and press releases. Not only does this circumvent the requirements of the APA, which provides for public input and prevents whiplash for industry with each change in leadership, but it also does not promote lasting policy directives and is harmful to consumers’ access to financial services.
“Recently, the CFPB has failed to fulfill its statutory obligation to comply with the Small Business Regulatory Enforcement Fairness Act (SBREFA), which is required when a rule may have significant economic impact on small entities. Evading this statutory obligation is not only unacceptable from a process standpoint, but also disadvantages the small institutions who serve consumers the CFPB is charged with ‘protecting.’
“In addition to the TABS Act, today we will examine bills that: reform the CFPB’s leadership structure by establishing an independent IG and creating a multimember bipartisan commission; focus on the requirements for funding the agency’s budget; require more oversight and quantitative analysis of the rulemaking process; and protect small businesses and whistleblowers.
“These bills are first steps towards reforming the unaccountable CFPB. I look forward to discussing these issues and hearing from our panel today on what reforms will be beneficial for the agency and consumers.”