The Time to Reform the CFPB is Now

Tomorrow, the Consumer Financial Protection Bureau’s (CFPB) Acting Director Mick Mulvaney will testify before the House Financial Services Committee on his first semi-annual report highlighting the Bureau’s work since he took the helm. This Thursday, he will testify before the Senate Banking Committee, where sparks are likely to fly between him and Sen. Elizabeth Warren (D-MA), who helped bring the CFPB into existence. While disagreements might be entertaining political theater to some, we hope spectators can look past the political fireworks to the much-needed reforms at the agency.

The Bureau’s semi-annual report asks Congress to pursue four key areas of reform:

1. Fund the Bureau through Congressional appropriations;
2. Require legislative approval of major Bureau rules;
3. Ensure that the Director answers to the President in the exercise of executive authority; and
4. Create an independent Inspector General for the Bureau.

Acting Director Mulvaney’s stated goals for the future of the agency mirror some of the reforms that the U.S. Chamber has long recommended. In a recently released report titled “Consumer Financial Protection Bureau, Working Towards Fundamental Reform”, the Center for Capital Markets Competitiveness (CCMC) laid out 23 recommendations to reform the Bureau. Each of the 23 recommendations are actionable items that provide the Bureau with guidance on how to meet three critical goals: ensuring consumers have access to the marketplace and choice in products and services; promoting the availability of information that consumers can use to make informed decisions; and providing protection against bad actors.

The American people also support reasoned reforms. In recent polling conducted by CCMC and Morning Consult, an overwhelming majority of respondents (66%) indicated they prefer the Bureau’s current approach to regulation as opposed to previous leadership’s “regulation by enforcement”. As U.S. Chamber President and CEO Tom Donohue said in commentary late last year, “For the past six years, the financial marketplace has been starved for clear rules of the road. Instead of delineating clear standards, the bureau has played in the gray area of regulating through enforcement.”

Opponents of reforming the Bureau support a single director structure, as opposed to a bipartisan commission with multiple viewpoints, and choose budget unaccountability. Under the current structure, there are no true checks and balances over the agency from the executive or legislative branches. In the same CCMC/Morning Consult poll, an overwhelming majority of respondents supported the Bureau being under appropriations (66%) and the commission structure (56%). Only with these common-sense reforms will the Bureau truly answer to the American people and the Chamber hopes that Congress will execute these two changes.

In the meantime, the Chamber is pleased to see some of its recommendations reflected in the semi-annual report and hopes Acting Director Mulvaney’s testimony will provide insight on how he plans to:

• Provide clear rules of the road;
• Create a robust cost-benefit economic analysis when promulgating rulemakings;
• Research and work on section 1071 of the Dodd-Frank Act;
• Adopt a robust no-action letter process and advisory opinion process;
• Establish true coordination with the prudential regulators;
• Reform the investigative and supervisory processes; and
• Establish internal checks and balances as we wait for Congress to act.

Only with consistent, transparent, data-driven policy will financial institutions be able to confidently lend and create new and innovative products without fear of retribution. This is only the beginning of the conversation, and the Chamber looks forward to working with the Bureau and interested stakeholders toward a common goal: enriching the U.S. economy and protecting consumers.