NCPA - National Center for Policy Analysis

Consumer Financial Protection Bureau: Unaccountable and Costly

July 26, 2011

The Consumer Financial Protection Bureau (CFPB) is an independent bureau within the Federal Reserve System that was designed by lawmakers to regulate a vast array of financial products and services.  The bureau officially opened on July 21, but staff has already begun to craft new regulations, says the Heritage Foundation.

  • The CFPB is prohibited from some regulatory activities until a director is nominated by the president and confirmed by the Senate.
  • Absent a director, however, the CFPB can conduct investigations as a form of policymaking.
  • Once confirmed, the CFPB director will exert unparalleled regulatory powers -- the consolidated and expanded authority over consumer financial products and services previously wielded by seven federal agencies.

Is the CFPB accountable?  No, says Heritage.

  • Largely unaccountable to Congress and imbued with sweeping powers, the agency is the epitome of regulatory excess.
  • Because the bureau is ensconced within the Federal Reserve, its budget is not subject to congressional control.
  • This budgetary independence limits congressional oversight of the agency.
  • The CFPB's accountability is further minimized by the vague language of its statutory mandate.
  • It is empowered to punish "unfair, deceptive and abusive" business practices.
  • While unfair and deceptive have been defined in other regulatory contexts, the term abusive is largely undefined, granting the CFPB officials inordinate discretion to define its own powers.

The CFPB will make consumer loans, credit and debit cards, checking and savings accounts, and many other financial products and services harder to obtain and more expensive to use.

Source: "Consumer Financial Protection Bureau: Unaccountable and Costly," Heritage Foundation, July 13, 2011.

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