The Bureau of Consumer Financial Protection’s structure suffers from four structural defects which make it a textbook example of how not to organize a regulatory agency.
1. The Bureau is insulated from Congressional oversight because its budget is not subject to the appropriations process.
2. The Bureau is insulated from Executive Branch oversight because the President cannot remove the Bureau’s Director except “for cause,” which means that once the Director is appointed, he or she can set policy in whatever way he or she sees fit, and there is nothing the President can do, no matter how misguided or harmful those policies may be.
3. The Bureau is insulated from judicial review because the Dodd-Frank Act requires that its interpretations of consumer financial law be subject to heightened deference by the judiciary.
4. The Bureau lacks the internal checks and balances to which other independent regulatory agencies are subject.
All four flaws make the Bureau an unaccountable regulatory fiefdom ruled by one person.
Unlike other federal agencies charged with consumer or investor protection, such as the Securities and Exchange Commission (SEC), Federal Trade Commission (FTC), Commodity Futures Trading Commission (CFTC), Consumer Product Safety Commission (CPSC), or the Federal Deposit Insurance Corporation (FDIC), the Bureau is not managed through a multi-member bipartisan commission or board.
Such a multi-member bipartisan commission would require the Bureau to consider multiple viewpoints and perspectives in the course of its rulemaking. A multi-member bipartisan commission would also discipline the Bureau’s managers by forcing them to articulate and debate the rationale and evidence supporting proposed actions, which would produce better-informed policies and reduce the threat of biased or politically motivated decisions.
A multi-member bipartisan commission would also promote regulatory stability, helping to insulate the Bureau from abrupt changes in policy and direction that might occur when a new Director is appointed.
Apart from its flawed management structure, the Bureau lacks an independent Inspector General to oversee its activities.
To paraphrase a famous Harvard Law Review article by Gary Lawson, “The Rise and Rise of the Administrative State,” the following is an apt description of how the Bureau operates today:
The CFPB Director promulgates substantive rules of conduct. The CFPB Director then considers whether to authorize investigations into whether the CFPB Director’s rules have been violated.
If the CFPB Director authorizes an investigation, the investigation is conducted by the CFPB Director’s employees, who report their findings to the CFPB Director.
If the CFPB Director thinks that the CFPB Director’s employees’ findings warrant an enforcement action, the CFPB Director issues a complaint.
The CFPB Director’s complaint that a CFPB Director rule has been violated is then prosecuted by the CFPB Director’s employees and adjudicated by the CFPB Director. This CFPB Director adjudication can either take place before the CFPB Director himself or before a semi-autonomous administrative law judge appointed by the CFPB Director.
If the CFPB Director chooses to adjudicate before an administrative law judge rather than before the CFPB Director and the decision is adverse to the CFPB Director, then the CFPB Director can appeal to the CFPB Director.
If the CFPB Director ultimately finds a violation, then, and only then, the affected private party can appeal to an Article III court. But the CFPB Director’s decision, even before the bona fide Article III tribunal, possesses a very strong presumption of correctness and heightened deference to the CFPB Director’s interpretation of law.
The Financial Services Committee on Wednesday will consider two bipartisan bills designed to address these shortcomings.
Bipartisan Commission Supported by Republicans and Democrats
The first, the Financial Product Safety Commission Act of 2015 (H.R. 1266, sponsored by Financial Institutions and Consumer Credit Subcommittee Chairman Randy Neugebauer) will replace the current Bureau with an independent financial product safety commission composed of five Presidentially-appointed, Senate-confirmed members to five-year terms. This is the same structure Elizabeth Warren, then-Chairman Barney Frank and House Democrats originally supported for the Bureau.
Bipartisan Inspector General Bill
The second bill, the Bureau of Consumer Financial Protection Inspector General Reform Act of 2015 (H.R. 957, sponsored by Rep. Steve Stivers), will create an Inspector General for the Bureau, rather than relying on the Federal Reserve Inspector General to oversee the agency.Read More
Financial Services Committee Chairman Jeb Hensarling (R-TX) delivered the following opening statement at today’s full committee markup of five bills to empower consumers and job creators:
The Committee meets to consider five important bills, the majority of them bipartisan and all of them designed to protect consumers and help build a healthier economy.
Consumers are understandably concerned about our economy. We remain stuck in the worst recovery of the last 70 years. At the same time, they’re concerned that Washington is taking away their choices and raising many of their costs.
Our committee has the privilege -- and responsibility -- to fight for them. Because every American -- regardless of which side of the tracks they grew up on, regardless of how humble their circumstances may be -- has the right to shape their own destiny; has the right to economic freedom and choice; and has the right to expect that Congress will work to build a healthier economy with more opportunities.
Our committee has already guided 41 bills through the House this year, but we still have a lot of work to do. So let me begin by briefly reviewing today’s agenda.
Millions of Americans plan their retirements based on advice from financial advisors. Unfortunately, the Department of Labor has proposed a rule that will make that advice unavailable or unaffordable. It will limit the right of Americans to choose the advisor they want and the investment products they currently enjoy. Those Americans hurt the most would be those with low and middle incomes. More than half of all House Democrats have joined Republicans in expressing these same concerns, and I commend them. This committee stands ready to protect consumers with H.R. 1090, offered by Mrs. Wagner.
There is justifiable concern about income inequality in America.
We must recognize that the root cause of income inequality is opportunity inequality. For those on the lower rungs of the economic ladder, burdensome government rules often smother opportunities to rise. When costly Washington mandates devour dollars that could otherwise be used to create jobs, the poor and unemployed are hurt the most. One such costly mandate is Section 953(b) of Dodd-Frank, which burdens every public company in America and will cost our economy billions of dollars with no material benefit. Even Mr. Frank of Dodd-Frank expressed skepticism, noting this provision came from the Senate and saying he hoped it could be “lessened as a burden” and ultimately changed. Thanks to the leadership of Mr. Huizenga, we have that opportunity today with H.R. 414.
Just as the House should have been more deliberative before acceding to the Senate on Section 953(b), the National Credit Union Administration – the NCUA – should have been more deliberative with its proposed rule to amend risk-based capital requirements for credit unions. Many are concerned the NCUA’s proposal is a solution in search of a problem. Bipartisan legislation from Mr. Fincher, Mr. Heck, Mr. Posey and others simply requires the NCUA to examine these concerns and study appropriate capital requirements for credit unions.
We’ll also consider two bipartisan bills that protect consumers and hardworking taxpayers by bringing needed accountability to the CFPB.
No agency can truly protect consumers if it is unaccountable to them. The CFPB is perhaps the most powerful and most unaccountable federal agency in history -- a dangerous defect that stems from the Bureau’s structure.
Unlike other federal agencies charged with consumer or investor protection, the CFPB is led by a single, all-powerful director -- unaccountable to the President, Congress and hardworking taxpayers.
Second, the CFPB does not have an independent inspector general.
Two bipartisan bills on today’s agenda will correct both of these flaws.
With H.R. 957 introduced by Mr. Stivers, Mr. Walz and Mr. Royce, the CFPB will finally have an independent Inspector General.
And with H.R. 1266 introduced by Chairman Neugebauer, Ms. Sinema, Mr. Scott and others, the CFPB will be governed by an accountable, bipartisan board. This is the very same structure that Democrats Elizabeth Warren, then-Chairman Frank, our current Ranking Member, and many others originally supported. They were clearly for it before they were against it. They will have another opportunity to be for it again today.
Properly designed, the CFPB is capable of great good. Let’s pass these pragmatic, bipartisan fixes so the CFPB can be the accountable consumer protection agency all Americans deserve.Read More
The Financial Services Committee today approved several bipartisan bills designed to protect consumers and help build a healthier economy.
“Consumers are understandably concerned about our economy. We remain stuck in the worst recovery of the last 70 years. At the same time, they’re concerned that Washington is taking away their choices and raising many of their costs, said Financial Services Committee Chairman Jeb Hensarling (R-TX).
“Our committee has the privilege -- and responsibility -- to fight for them. Because every American -- regardless of which side of the tracks they grew up on, regardless of how humble their circumstances may be -- has the right to shape their own destiny; has the right to economic freedom and choice; and has the right to expect that Congress will work to build a healthier economy with more opportunities. Our committee has already guided 41 bills through the House this year, but we still have a lot of work to do,” Hensarling added.
Below are the bills approved by the committee and their vote totals:
H.R. 414, the Burdensome Data Collection Relief Act
Sponsor: Rep. Bill Huizenga (R-MI)
H.R. 414 repeals a burdensome, unneeded and expensive requirement of the Dodd-Frank Act for publicly traded companies so they can instead focus resources on job creation and economic growth.
H.R. 414 passed the committee 32-25
H.R. 957, the Bureau of Consumer Financial Protection-Inspector General Reform Act of 2015
Sponsor: Rep. Steve Stivers (R-OH)
H.R. 957 ensures greater accountability at the Consumer Financial Protection Bureau (CFPB) by creating an independent Inspector General for the CFPB who is, nominated by the President and confirmed by the Senate.
H.R. 957 passed the committee 56-3
H.R. 1090, the Retail Investor Protection Act
Sponsor: Rep. Ann Wagner (R-MO)
H.R. 1090 begins to correct the Department of Labor’s proposed fiduciary rule that will raise costs, restrict choice and reduce access to investment advice for lower and middle income families seeking financial independence.
H.R. 1090 passed the committee 34-25
H.R. 1266, the Financial Product Safety Commission Act of 2015
Sponsor: Rep. Randy Neugebauer (R-TX)
H.R. 1266 removes the CFPB from within the Federal Reserve System and re-establishes it as a stand-alone agency that is governed by a five-member, bipartisan commission. All authorities and powers of the CFPB remain unchanged.
H.R. 1266 passed the committee 35-24
H.R. 2769, the Risk-Based Capital Study Act of 2015
Sponsor: Rep. Stephen Fincher (R-TN)
H.R. 2769 requires the National Credit Union Administration to conduct a study of the appropriate capital requirements for Federal and State credit unions before new rules take effect.
H.R. 2769 passed the committee 50-9Read More
Financial Services Committee Chairman Jeb Hensarling (R-TX) today announced the committee’s hearing schedule for the week of September 28.
Tuesday, September 29 at 10:00 A.M. – The Financial Services Committee will hold a hearing to receive the semi-annual report from Director Richard Cordray of the Bureau of Consumer Financial Protection. When Director Cordray last appeared in front of the committee in March, committee Members emphasized the need for reforms to make the Bureau accountable and transparent.
“The CFPB undoubtedly remains the single most powerful and least accountable Federal agency in all of Washington,” Chairman Hensarling said at the March hearing. “When it comes to the credit cards, auto loans, and mortgages of hardworking taxpayers the CFPB has unbridled, discretionary power not only to make those less available and more expensive, but to absolutely take them away."
Tuesday, September 29 at 2:00 P.M. – The Housing and Insurance Subcommittee will hold a hearing entitled “The Impact of Domestic Regulatory Standards on the U.S. Insurance Market.” The hearing will focus on various regulatory standards being promulgated by both state insurance supervisors and the Federal government.
As the nation marked Constitution Day on Thursday, the Financial Services Committee heard from witnesses that the Dodd-Frank Act makes Americans less free. By centralizing greater power in the hands of Washington bureaucrats, Dodd-Frank results in a less dynamic economy and a command-and-control system in which regulators dictate credit offerings and individual freedom and choice are sacrificed.
"Dodd-Frank erodes the economic freedom and opportunity that empowers low income Americans to rise and generate greater shared prosperity. Dodd-Frank moves us away from the equal protection offered by the impartial rule of law towards the unequal and victimizing rule of political bureaucrats. Of all the harm Dodd-Frank inflicts, this is the most profound and disturbing" Chairman Jeb Hensarling (R-TX) said.
Republicans highlighted the lack of accountability and unconstitutionality of the modern administrative state in which the rule of law is replaced by the rule of regulators. Members and witnesses drove home the importance of the separation of powers and reiterated that while elected officials answer to their constituents back home, unelected bureaucrats who make sweeping regulatory decisions do not have the same accountability to the American people.
Rep. Robert Hurt (R-VA) said he’s heard from his constituents about the impact Dodd-Frank is having on their lives. “Constituents told me that while this law was touted as Washington’s attempt to protect consumers, in reality it has only left consumers with fewer choices and higher costs to access capital,” he said. “In giving even more power to Washington bureaucrats, Dodd-Frank has made us less free and gravely inhibited individual freedom and choice.”
George Mason University law professor Todd Zywicki reminded the committee that freedom and an effective financial services system go together. “Freedom to gain access to capital to start and grow a business, freedom to buy a home and provide for your family’s financial security, freedom to choose those whom you entrust with your hard-earned money provide the means for pursuing the American dream.”MPBN News reported Rep. Bruce Poliquin’s (R-ME) comments at the hearing on the harm of Dodd-Frank’s regulatory burden. "But now you have this big net - we do a lot of fishing up in Maine - and this big net is smothering everybody that should be able to swim through the net," he said.
Members and witnesses at Thursday’s Monetary Policy and Trade Subcommittee hearing said recent global economic turmoil presents an opportunity for the United States to lead international economic policies away from government intervention and toward free markets, free trade and fiscal responsibility.“The combination of debt and misguided policy decisions being implemented by countries across the globe provides the U.S. with an opportunity to reorient international priorities,” remarked Subcommittee Chairman Bill Huizenga (R-MI). “Today’s hearing urged the Obama Administration to advance a ‘back to basics’ approach to economic policy that prioritizes fiscal responsibility and free markets.”
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WASHINGTON - As America celebrated Constitution Day on Thursday, the Financial Services Committee held a hearing to examine how hardworking Americans are less free because of the Dodd-Frank Act passed by Congress in 2010. The hearing was the third in a series focused on the harmful impact Dodd-Frank has had on Americans’ prosperity, freedom and financial stability.
“Dodd-Frank erodes the economic freedom and opportunity that empowers low income Americans to rise and generate greater shared prosperity. Dodd-Frank moves us away from the equal protection offered by the impartial rule of law towards the unequal and victimizing rule of political bureaucrats. Of all the harm Dodd-Frank inflicts, this is the most profound and disturbing,” said Chairman Jeb Hensarling (R-TX).
Instead of protecting Americans’ freedom, Chairman Hensarling continued, “Dodd-Frank exemplifies the insidious belief among many Washington elites that the American people cannot be trusted to make good decisions for themselves so government must do it for them. Without Washington’s coercive mandates, we just might pick the wrong health plan, the wrong mortgage, the wrong financial advisor, maybe even – God forbid – the wrong lightbulb!”
Topline Witness Quotes:
“Freedom and an effective financial services system go together. Freedom to gain access to capital to start and grow a business, freedom to buy a home and provide for your family’s financial security, freedom to choose those whom you entrust with your hard-earned money provide the means for pursuing the American dream.” - Todd Zywicki, George Mason University Foundation Professor of Law
“The very meaning and structure of our Constitution embody the great foundational principle of the rule of law. It is fair to say that the rule of law may be the most significant and influential accomplishment of the long history of human liberty. And yet here we are today, covered by a vast web of rules and regulations, endless policies and programs, all emanating from government, mostly the work of vast agencies and bureaucracies that largely operate outside our rule of law structure.”
“It is no exaggeration to say that the greatest political revolution in the United States since the establishment of the Constitution has been the shift of power away from the institutions of republican government to an oligarchy of unelected experts who rule over virtually every aspect of our daily lives, ostensibly in the name of the American people but in actuality by the claimed authority of science, expertise, and administrative efficiency. In assuming more and more tasks in more and more areas for which it is less and less accountable, modern government has done great damage to American liberty and self-government.” - Dr. Matthew Spalding, Associate Vice President and Dean of Education Programs, Hillsdale College
“[T]he corporatism enshrined in Dodd-Frank is sharply at odds with the commitment to transparency and competition that has always been the hallmark of American financial regulation. Even apart from the adverse economic effects, it offends our sense of fair play when regulation takes place behind closed doors and with little opportunity for meaningful scrutiny.” - Professor David A. Skeel, University of Pennsylvania Law School
The turbulent global economy presents the United States with an opportunity to reorient international economic priorities toward free markets, free trade and fiscal responsibility, members of the Financial Services Monetary Policy and Trade Subcommittee said today at a hearing.
“The combination of debt and misguided policy decisions being implemented by countries across the globe provides the U.S. with an opportunity to reorient international priorities,” said Monetary Policy and Trade Subcommittee Chairman Bill Huizenga (R-MI). “Today’s hearing urged the Obama Administration to advance a ‘back to basics’ approach to economic policy that prioritizes fiscal responsibility and free markets.”
As the nation marks Constitution Day on Thursday, the Financial Services Committee will hold a hearing on "The Dodd-Frank Act Five Years Later: Are We More Free?"
Thursday, September 17 at 10:00 A.M. – The full committee will hold a hearing entitled “The Dodd-Frank Act Five Years Later: Are We More Free?” This will be the third of the committee’s three hearings looking at some of the consequences of the Dodd-Frank Act in the five years since it became law. The two previous hearings examined whether Dodd-Frank has made our nation’s financial system more stable and Americans more prosperous. Thursday’s hearing will assess Dodd-Frank’s impact on the rule of law and individual liberty.
This week’s hearing will take place in room 2128 of the Rayburn House Office Building and will also be webcast. Additional information about the hearing, including a list of invited witnesses, will be available online at financialservices.house.gov/.Read More
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2129 Rayburn HOB
Washington, DC 20515