New Legislation Would Undermine the CFPB’s Effectiveness

A bill introduced on Tuesday, HR 5266, co-sponsored by Georgia Representative David Scott (D – GA 13th District), would restructure the Consumer Financial Protection Bureau (CFPB) from an agency led by a single director to one headed by a five-member commission. Big banks and predatory lenders – supporters of this legislation – portray the CFPB as unaccountable and out of control.  In reality, since its founding in 2011, the CFPB has been looking out for consumers’ interests, issuing rules to make a more fair and transparent marketplace, enforcing the law, returning money to defrauded consumers, and investigating consumer complaints. Georgia Watch opposes HR 5266 because it would weaken the effectiveness of the CFPB, an agency created in the wake of the 2008 financial crisis to get banks and lenders to treat people fairly.

To highlight a few of their accomplishments over the past six years, the CFPB has returned $3.5 billion to credit card customers saddled with fraudulent add-on products, issued a rule requiring mortgage lenders to verify a borrower’s ability to repay before issuing loans, provided $12 billion in relief to consumers cheated by financial companies, handled over 1.2 million consumer complaints, and issued rules to protect low-income consumers from predatory lending.  This work has made the CFPB very popular among Americans across the political spectrum. A recent survey by Americans for Financial Reform and Center for Responsible Lending shows that a majority of Americans support the bureau’s work – 85% of Democrats, 66% of Republicans, 77% of Independents – 74% total.

With approval numbers like this, where is the outcry for reform coming from? The answer is the industries the CFPB regulates – banking, lending, debt collection, credit reporting and other financial institutions. This industry’s claim that the agency is “unaccountable” could not be further from the truth. The Financial Stability Oversight Council has the authority to veto the CFPB’s rules and Congress can also overturn any CFPB rule with a simple majority – a power they have recently used to roll back consumer protections. Further, the CFPB must report twice per year to Congress, is accountable to the Office of Inspector General for the Board of Governors of the Federal Reserve System, and to the Government Accountability Office. If the leadership structure at the CFPB changes as proposed in HR 5266, accountability would be undermined. With one leader, it is clear who to hold accountable; with multiple leaders, finger-pointing and blaming is common. Opponents falsely claim that the CFPB’s single-director structure is unprecedented and unique. The Office of the Comptroller of the Currency has had a single-director structure since it was established in 1863. The Federal Housing Finance Agency, Social Security Administration, the EPA, IRS, and FDA are all single-director-led agencies. The idea for a five-member commission for the CFPB was previously debated and discarded in favor of a single director – a decision ratified by the Senate.

The CFPB was designed to be a politically independent watchdog, not subject to party politics nor beholden to special interest groups or Congressional gridlock. Multi-member boards often fall into patterns of inactivity, partisanship, and chronic unwillingness to challenge the industries they are charged with overseeing. Moreover, as the financial industry is consistently the largest single source of campaign donations, having Congress ratify members would likely result in an anti-consumer bias and dismantle the CFPB’s independence.

The CFPB’s single-director model for leadership has proven to be effective, efficient, and transparent.  Georgia Watch is against HR 5266 as the proposed change in structure would diminish the CFPB’s effectiveness and reduce its accountability and independence.

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