The battle for CFPB’s future

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Lost in the clamor over health-insurance repeal and tax reform has been a move by Republican members of Congress to attack Consumer Financial Protection Bureau (CFPB). CFPB was created by the Dodd-Frank Act in 2010, and it’s charged with setting rules to “promote fairness and transparency” in financial products and services, so consumers are protected from unfair practices. In June 2017, House of Representatives voted to curtail CFPB’s role significantly. At press time, the bill faced an uncertain future in the Senate.

CFPB’s opponents claim that the agency wields too much unchecked power and adds costs to consumers. The head of House Financial Services Committee, Jeb Hensarling, R-Texas, who sponsored the House bill, called CFPB “the summit of unelected, unaccountable and unconstitutional agency government.”

Financial Stability Oversight Council can overrule CFPB regulations by a two-thirds vote if it believes that CFPB’s actions would cause instability to the financial system. It’s a standard that hasn’t been met, and an appellate court said it’s “unlikely to be met in practice in most cases.” CFPB opponents agree.

Those same people also don’t like that CFPB is independent, similar to how Federal Reserve is, so a president can’t replace the director without cause. (Current director Richard Cordray’s term doesn’t end until July 2018.)

Opponents say consumer protection regarding financial items should return to Federal Trade Commission and state regulators, as it was before CFPB’s creation. “FTC has always been the federal front line against this stuff,” says Norbert Michel of the conservative think tank The Heritage Foundation. “We didn’t need another federal agency.”

Supporters of CFPB counter that FTC doesn’t have the power to write rules that would protect consumers, as CFPB does. Consequently, consumers would suffer, they say.

Supporters also say Republicans are more beholden to special interests that oppose CFPB, and donations to GOP leaders seem to bolster that claim. For example, according to Opensecrets.org, Hensarling received $1.3 million from financial, insurance or real-estate companies during the 2016 campaign. By comparison, the website says, the highest ranking Democrat on the committee, Maxine Waters of California, received about $1 million less from those industries during the 2016 campaign.

CFPB’s work has proved to be effective. CFPB says it returned $11.8 billion to consumers, either through compensation or canceled debt, since its inception in 2011. In fact, financial-news website NerdWallet found that for every $1 that’s spent on the agency, CFPB has returned $4 to consumers. CFPB has aimed at areas that previously received scant attention by regulators, such as payday loans, credit bureaus and student-loan servicers. It also was involved in uncovering the Wells Fargo fake-account scandal.

“To stand up for consumers, you need a strong agency,” says Michael Best of Consumer Federation of America. Ed Mierzwinski of U.S. Public Information Research Group adds that making CFPB less independent would weaken the agency.

Unfortunately, most consumers don’t know that CFPB exists. Creditcards.com reported in March 2017 that 81 percent of consumers who were surveyed don’t know enough about CFPB to have an opinion on whether it should stay. That makes it easier for Republicans to attack the agency, because they can shape people’s views about it, says Matt Schulz of Creditcards.com. The survey also found that those who have an opinion about CFPB favor it by a 3–1 margin overall and by 2–1 among consumers who identify themselves as Republican.

It’s obvious to us that CFPB benefits consumers. Government agencies operate on the whims of their leaders. We doubt that a nonindependent CFPB would continue to look out for consumers.