Banks Ask for Commission to Lead Consumer Financial Protection Bureau, Halt Consumer Protection Regulations
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Banks Ask for Commission to Lead Consumer Financial Protection Bureau, Halt Consumer Protection Regulations

The banks believe that the agency's director has too much authority and too little oversight

December 7, 2016

Once again, bank lobbyists are pressuring the Senate to try to reform the Consumer Financial Protection Bureau (CFPB), the federal financial watchdog agency.

The groups, including the Consumer Bankers Association, the Credit Union National Association, the Independent Community Bankers of America, and the National Association of Federal Credit Unions, wrote a letter addressed to Senate leaders in which they requested legislation changing the CFPB's leadership from one director to a commission of five members.

Under the provisions of a law called the Congressional Review Act, they also called for the voiding of the agency's new protections against prepaid cards and for the halting of work on regulations for mandatory arbitration, payday lending, and third-party debt collection.

The director, they wrote, has "unprecedented authority over financial institutions, with minimal oversight. As the sole decision maker, the director can promulgate regulations and levy enforcement actions that have sweeping and long lasting effects on credit availability for consumers."

Many in the bank lobby have favored a commission leadership structure since the agency was created by the 2010 Dodd-Frank Wall Street reform law passed to protect consumers from being taken advantage of in mortgages, student loans, credit cards, and banks. The CFPB recently fined Wells Fargo $185 million for creating unauthorized bank accounts.

The first Senate bill aimed at making changes to the agency was drafted by Republican legislators in 2012. They introduced similar bills over the next three years. Over in the House, the Financial Services Committee recently approved a bill to create a commission to run it.

President Obama, a Democrat, championed the Dodd-Frank Act and has always vetoed such attempts to establish a commission structure. It is expected that President-elect Donald Trump, a Republican, will support any changes to the agency.

The CFPB's current single-director structure enables it to take action quickly, say proponents, and eliminates the risk of long-lasting fights between members of a commission.

A panel of three judges in the U.S. Court of Appeals in the District of Columbia recently ruled that the director is too powerful, although it did decree that the problem could be fixed by allowing the president to fire the director without cause. In response, the government has submitted a petition for the entire court to review the decision. The court has signaled that it will approve taking up the review before Trump is elected on January 20.