Consumer Financial Protection Bureau under attack in Congress
Consumers Union urges lawmakers to oppose congressional bills that would turn the consumer watchdog into a lapdog
WASHINGTON, D.C. – Senator David Perdue (GA) introduced legislation today that would undermine the Consumer Financial Protection Bureau’s ability to effectively protect consumers by politicizing its budget through the congressional appropriations process, according to Consumers Union, the policy and mobilization division of Consumer Reports.
Senator Perdue’s bill is just the latest proposal being pushed by financial industry lobbyists and their allies in Congress to weaken the agency. Another bill introduced by Senator Deb Fischer (NE) in January would create more bureaucracy by replacing the CFPB’s director with a five-member commission, while a bill being drafted by Representative Jeb Hensarling (TX) is expected to essentially gut the agency by eliminating much of its authority and enforcement powers.
“Opponents of consumer protection are at it again,” said Laura MacCleery, Vice President of Policy and Mobilization for Consumer Reports. “The very same lawmakers who fought creation of the CFPB, are now hoping to take both the bark and bite out of this critical consumer watchdog. These bills would cripple the CFPB’s ability to stand up to the big banks and predatory lenders and leave consumers vulnerable to financial scams and rip-offs.”
Senator Perdue’s bill would give lawmakers control of the CFPB’s budget by subjecting it to the congressional appropriations process. Like other financial industry regulators, such as the Office of the Comptroller of the Currency, Federal Deposit Insurance Commission, and the Federal Reserve, the CFPB receives its funding independently from the congressional appropriations process. In the case of the CFPB, it receives a small percentage, subject to a statutory cap, of the Federal Reserve’s annual budget, which comes primarily from the interest it earns on government securities.
“Congress deliberately set up the CFPB with independent funding to protect it from banking industry lobbyists determined to muzzle the watchdog by shrinking its budget,” said MacCleery. “Subjecting the CFPB to the annual budget process would threaten the stability of its funding and undermine its ability to vigorously protect consumers.”
Senator Fischer’s bill would restructure the CFPB by replacing its director with a five member commission. “We can’t afford to hamstring the CFPB with an unnecessarily complicated bureaucratic structure,” said MacCleery. “Replacing the CFPB’s director with a multi-member commission would slow down its decision-making process and make it more prone to internal discord and gridlock.”
According to recent news reports, a memo by Representative Hensarling describing his legislation indicates that it would eliminate the CFPB’s authority to supervise banks, credit reporting agencies, and payday lenders. The watchdog would lose its ability to stop unfair, deceptive, and abusive practices, and would be stripped of the power to fine companies for breaking the law or order them to provide refunds to consumers cheated out of their money. The bill even blocks the CFPB’s authority to conduct education campaigns to help consumers make smarter financial decisions and would eliminate the public’s ability to file complaints with the agency and get help resolving them when they’ve been mistreated.
Under the bill, the CFPB also loses its crucial independence from banking industry control. Its director could be fired at will by the President and the agency’s budget would be subject to the annual congressional appropriations process, opening it up to further attack by financial industry lobbyists and other opponents determined to undermine the agency and shrink its budget.
“Members of Congress appear to be forgetting the financial crisis that cratered our economy and hurt millions of Americans,” said MacCleery. “But American consumers have memories that are not so short. Lawmakers should side with consumers and stand up to Wall Street and the big banks by rejecting this unjustified attack on the CFPB.”
The CFPB was established as part of the measures passed by Congress in the wake of the 2008 financial crisis. The Bureau works to ensure consumers are treated fairly by establishing basic standards that banks and other financial companies must follow and by policing abuses in the marketplace. Since the CFPB opened its doors in 2011, it has won almost $12 billion in refunds and relief for an estimated 27 million Americans who’ve been defrauded by financial companies.