Consumers and advocates had better beware. Last year, in response to the harmful financial practices that caused unforgettable pain to millions of families across the country, Congress passed comprehensive financial reform and consumer protection legislation.
Central among these reforms was the creation of a new agency, the Consumer Financial Protection Bureau (CFPB). Previously, enacting consumer protections rules, performing compliance reviews, and enforcement activities were conducted by multiple federal agencies, each of whom failed horribly at their jobs. Under the CFPB, all consumer protections laws would, for the first time, be the sole focus of one federal agency with the power to actually make consumer protection a priority.
The CFPB is supposed to be up and running by July 1st, but Congress, in its infinite attempts to please and protect Wall Street, is attempting to eviscerate the CFPB before it even becomes functional. Specifically, several bills have been introduced that, if passed, would substantially undermine the CFPB’s ability to stop abusive financial practices.
H.R. 1315, which was approved in the House Financial Services Committee by a vote of 35-22, would allow a simple majority of bank regulators and others on the Financial Services Oversight Council (FSOC) to veto CFPB rules they deem to be “inconsistent with safe and sound operations of financial institutions.” In other words, the very banking regulators who failed to fulfill their roles as consumer advocates before would have the ability to stop the CFPB from doing the same job that they refused to do. This vague “deemed to be inconsistent” standard will certainly be used by these agencies to stop any consumer protection measures that might affect the profitability of financial institutions.
H.R. 1121, which also passed in the House by a vote of 33-24, would alter the leadership structure of the CFPB from that of a single director to a five-member commission. Thus, instead of one agency solely focused on consumers, there would be multiple agencies whose priorities are split between protecting consumers and pleasing financial institutions. The CFPB already faces unprecedented restrictions on its powers. For instance, nowhere else in federal law can one set of regulators—in this case two-thirds of the members of the FSOC—veto the actions of another agency. The amount of funding provided to the CFPB is capped, a statutory limit imposed on no other financial regulator, and the CFPB is the only financial regulator that must comply with the federal Regulatory Flexibility Act, which allows small businesses to see proposed rules before the public does, adding months to the already lengthy rulemaking process.
Finally, H.R. 1667, approved by a 32-26 House vote, would require that the CFPB’s Director be confirmed by the Senate before the CFPB could exercise its authorities. This follows a letter from 44 Senate Republicans stating their intent not to confirm any CFPB director until the legislative reforms weakening the CFPB have been adopted.
As the Consumer Federation of America’s press statement in response to the Republican senators’ letter stated: “Enactment of these measures would virtually guarantee that the CFPB would be a weak and timid agency without the will or ability to curb the kind of financial abuses that caused the nation’s worst financial crisis since the Great Depression.”
To prevent another economic disaster and stop banking regulators from throwing consumers under the bus once again, the CFPB’s authority and autonomy must be safeguarded. Attempts to weaken it will just return us to the status quo. And isn’t that how we got into this mess in the first place?
Call or send a message to your legislators today urging them not to support these bills. The Switchboard's number is 202.224.3121. The operator can connect you to your legislator's office.
This blog post was coauthored by Ji Won Kim.