Republicans have launched an initiative to limit the power of the Consumer Financial Protection Bureau (CFPB). Established in response to the 2010 Dodd-Frank Bill, the CFPB was the brainchild of Massachusetts Senator Elizabeth Warren while she was still a Harvard professor. Since its genesis, the agency has been criticized by Republicans for imposing excessive regulations on the financial services industry while having limited accountability. Rep. Randy Neugebauer (R-Texas), Chairman of the House Financial Services subcommittee overseeing consumer credit, is introducing legislation which would replace the agency’s single leader with a five member commission. This new organizational structure would make the CFPB similar to the Securities Exchange Commission (SEC). The proposed bill also includes the addition of an agency inspector general and the requirement that the agency be accountable to congressional appropriations. The CFPB, which is currently funded by the independent Federal Reserve, is not subject to congressional funding control.
Congress is committed to limiting the power of the Consumer Financial Protection Agency, which was initially created in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The CFP, which “consolidates most Federal consumer financial protection authority in one place” was established to protect consumers against predatory practices of financial services organizations. “The CFPB undoubtedly remains the single most powerful and least accountable federal agency in all of Washington,” Financial Services Committee Chairman Jeb Hensarling told bureau Director Richard Cordray in a hearing on March 3. The House had previously passed legislation to make the CFPB more transparent and accountable. These efforts will now gain greater traction since the Republicans now control both the House and the Senate. Senate Banking Chairman Richard Shelby (R-Alabama) has been against the agency since its implementation.
Banks and other financial services organizations are already showing their support for Neugebauer’s bill. But of course, liberal groups are lining up in dissent. Credo Action, a progressive group has already generated 145,863 signatures from an online campaign to block congress from passing legislation which will curtail the CFPB. Americans for Financial Reform, another consumer advocacy agency, sent a letter to Congress in opposition to the GOP’s proposed revamp of the CFPB. The progressive groups cited the $4.6 billion which the CFPB has won for consumers in situations involving financial companies in “illicit” business practices. These agencies also advanced the argument that five-member commissions create internal bureaucracy which stifles an agency’s ability to be nimble.
Neugebauer countered with the argument that Democrats have professed past support for the five-person commission, as it creates more checks and balances. Even Elizabeth Warren’s early proposal drafts show that she envisioned the CFPB as a five member commission similar to the Consumer Product Safety Commission. Warren’s original vision was supported at the time by Senator Dick Durbin (D-Illinois) and Senator Barney Frank (D-Massachusetts), one of the architects of Dodd-Frank.
The CFPB overhaul bill will face an uphill battle in the Senate. And of course, President Obama has already threatened to veto any legislation which seeks to roll back Dodd-Frank. But that knowledge should not be a deterrent to pushing for this legislation. The time for greater transparency and accountability is here. We need to have congressional oversight for agency budgets and strategic initiatives. We cannot continue to let agencies exist which do not have appropriate authority checks and balances in place.
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