NCPA - National Center for Policy Analysis

The Unchecked Consumer Financial Protection Bureau

February 7, 2013

In response to the bursting housing bubble, the Dodd-Frank Wall Street Reform and Consumer Protection Act created the Consumer Financial Protection Bureau (CFPB) to oversee consumer financial products and service throughout the economy. Consolidating 18 consumer laws, the CFP        B was designed to have unparalleled radical powers that evade the checks and balances that apply to most regulatory agencies. The result is an agency that is undermining business investment and consumer credit, says Diane Katz, a research fellow with the Heritage Foundation.

  • The CFPB become operational on July 21, 2011 but only started its activities once President Obama appointed Ohio attorney general Richard Cordray through a "recess appointment," which avoided the typical confirmation process despite the Senate being in session.
  • Because the bureau operates within the Federal Reserve System, it falls under virtually no oversight in regulating the six services it has decided to regulate: debt collection, consumer reporting, prepaid cards, debt relief, consumer credit and money transmitting, check cashing and related activities.
  • The statute that empowers the CFPB is incredibly vague, leaving the staff of 1,000 with a $600 million budget to interpret its meaning without any defined or fixed standards.

Katz says that the agency has replaced the rule of law with risky rules that allow examiners to determine the likelihood of harm in the future rather than any actual violation of the law. Engaging in such speculative assessment of risk has allowed the bureau to effectively bring 94 percent of the annual receipts of the entire consumer reporting sectors and 63 percent of the annual receipt of the debt collection market under its supervision.

Congress should eliminate the CFPB entirely or cut its funding. At the very minimum, Congress should define the language of the statue so the bureau does not have the ability to define its own powers. Without reform, the Consumer Financial Protection Bureau will continue to assume it knows more than consumers and wreak havoc on U.S. financial markets.

Source: Diane Katz, "The CFPB in Action: Consumer Bureau Harms Those It Claims to Protect," Heritage Foundation, January 22, 2013.


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