Patrick McHenryChairman

The economic downturn in 2008 cost Michiganians their jobs, families their savings, and some even their homes. In response to this seismic event, Democrats in Congress passed and President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law. According to its supporters, Dodd-Frank was a panacea of regulatory solutions that would end “too big to fail” and prevent a future financial crisis.

In reality, Dodd-Frank has made it even more difficult for struggling families across Michigan to secure a future for themselves and for their children.

First, Dodd-Frank did not end the notion that certain banks are “too big to fail.” Instead, it enshrined it. Today, hardworking taxpayers continue to be on the hook for Wall Street’s poor business decisions thanks to Dodd-Frank’s bailout fund. Secondly, since Dodd-Frank was enacted, the largest banks are even bigger while the small banks are fewer. Community financial institutions that had nothing to do with the crisis are being strangled by overly burdensome regulations that were intended for massive banks. But we need our community and midsize regional financial institutions to be able to lend to consumers and small businesses so they can innovate, invest and create jobs.

To restore economic opportunity to hardworking families, I am working with my colleagues on the financial services committee to introduce the Financial CHOICE Act. This commonsense legislation will protect consumers by restoring accountability, ending taxpayer bailouts, and providing regulatory relief for community financial institutions.

At the center of this legislation is accountability. It requires strong capitalization standards for banks and imposes the toughest penalties in history to protect consumers from financial fraud. The Financial CHOICE Act also holds Washington bureaucrats accountable to the American people by placing the regulators themselves under Congressional Appropriations.

Since Dodd-Frank passed in 2010, big banks have gotten bigger and small banks have disappeared at an alarming rate. The Financial CHOICE Act protects taxpayers by eliminating “too big to fail” labels once and for all. Instead, we repeal this self-fulfilling prophecy and require failing institutions to liquidate through a streamlined bankruptcy without depending on taxpayer dollars.

Dodd-Frank created a one-size fits all regulatory structure that treats community banks the same as Wall Street Banks. Unlike some of the largest banks, community financial institutions across Michigan can’t afford to hire hundreds of lawyers and compliance officers to sort through Dodd-Frank’s red tape. These regulatory costs are passed on to consumers in the form of increased fees, fewer products and services, and more limited credit options. The Financial CHOICE Act eliminates this one-size-fits-all regulation by providing commonsense relief that allows community banks and credit unions to utilize their resources for lending and meeting the needs of their customers.

This bill will protect taxpayers and consumers from anti-growth Dodd-Frank regulations, and help hardworking Michiganians achieve financial independence.

Rep. Bill Huizenga, R-Holland, represents Michigan’s 2nd Congressional district, and chairs the House Financial Services’ Subcommittee on Capital Markets, Securities & Investment.

LINK to original story in The Detroit News 

For seven years now, the Dodd-Frank Act has stifled the American Dream — for half of the country.

Let me explain.

After the 2008 financial crisis, the economy was in dire straits. Washington responded with the Dodd-Frank Act, a sweeping overhaul of the American financial regulatory system, implementing the strongest regulations seen since FDR's New Deal.

Since 2008, some of America's large firms and large metropolitan cities have experienced positive post-recession recovery. Today's rising stock market figures indicate that our economy is prosperous and gaining strength with each day. It appears as though this is a time of growth for businesses, and this is true for the portion of Americans who have already established their financial independence.

You aren't hearing the story of the other half of America.

Our smaller communities and hopeful entrepreneurs have been shut out. Those who are seeking to start or grow their small business are incapable of accessing the capital necessary to merely plant both feet on the ground. Favorable stock market figures aren't translating to the average American's paycheck.

The celebrated American Dream of starting a business and attaining true financial independence is not achievable for these individuals because President Obama and Dodd-Frank's America put big cities and big banks first.

The poorly-constructed, 2,000-page Dodd-Frank Act has ballooned to 25,000 pages of rules and regulations. It appears Washington forgot that real people rely on banks to access the capital they need to finance their businesses, educations and homes.

In deeming a select group of banks "too big to fail," Washington saved Wall Street from collapse, but as a result, unelected bureaucrats and overregulation handcuffed community banks, regional banks, credit unions and other lenders.

These smaller financial institutions have their hands tied with onerous regulations and high compliance costs, and their ability to loan money is constrained.

To provide the relief these Americans need, Congress must roll back some of the heavy-handed Dodd-Frank provisions.

That is the only way to fuel our economic engine in West Tennessee and across the country.

In 2010, I joined the board of BankTennessee, a community bank in West Tennessee. It is no secret that this was an unfavorable time to join a bank board, as it was just two years after the financial crisis. The economy was stagnant, and banks across the country were struggling to resume routine business.

Joining the board of BankTennessee in 2010, the year of Dodd-Frank's fruition, afforded me a unique vantage point to observe six years of the palpable damage the law inflicted on America's small businesses and financial institutions.

After seeing the obstacles BankTennessee and banks across the nation faced following the crisis, I know how important it is to roll back Dodd-Frank so, once again, individuals can access capital.

This was one of the reasons I decided to run for Congress.

After being elected to the House of Representatives, I set my sights on becoming a member of the financial-services committee –a committee enthusiastic about the economic opportunities that lie on the other side of regulatory reform.

Rural communities and our working class — made up of some of the most patriotic and dedicated people in America — have not had the luxury of Washington's protection.

A majority of Americans cited the economy as their number one concern in the voting booth last November. President Donald J. Trump was elected because he recognized that half of America has been left behind in this two-speed economy.

Now, as a member of the financial-services committee, I am working with Chairman Jeb Hensarling and my colleagues on the committee to change the current system.

In our first full committee hearing this February, Federal Reserve Chair Janet Yellen delivered her semiannual monetary policy report to Congress. A couple things stood out to me in her remarks. Chair Yellen said that our nation is at full employment and that, while there is still room for improvement, wages are rising.

Chair Yellen should take a drive through West Tennessee. She would see how that may be true for the half of America that benefitted from Dodd-Frank. Unfortunately, Chair Yellen's evaluation was not considering a dynamic economy — an economy that encourages new businesses, new job creation and new salaries.

In 2014, the number of small businesses added to the economy was 650,000 firms short of the average. That translates to a loss of roughly 6.5 million jobs.

By implementing one-size-fits-all regulations, Washington bureaucrats have made lending nearly impossible for smaller banks, shutting down their ability to empower dependable clients who would reinvest in their communities.

With nowhere else to turn, entrepreneurs and small businesses who do not qualify for bank loans turn to credit cards and home-equity lines of credit, but Dodd-Frank has shut down these avenues, with credit-card issuance at a record low of 50 million fewer accounts than before the recession.

The American people should be in charge of their own economic opportunity, not bureaucrats in Washington.

Now, Congress and the Trump administration have an opportunity to roll back the regulations causing this dichotomy in the American economy.

The financial-services committee has already hit the ground running on legislation that will dismantle Dodd-Frank and open the door for all Americans to achieve financial independence. I am encouraged by the ambitious and productive schedule Chairman Hensarling has mapped out.

Our committee is working to grow the American economy and help put more people back to work with full-time, good-paying jobs.

Dodd-Frank created two Americas, but I see a unified U.S. economy that serves all Americans.

Commentary by Rep. David Kustoff (R-TN), who represents Tennessee's 8th District, which includes 13 counties and portions of Shelby and Benton Counties. Kustoff also serves as a member of the House financial-services committee. Follow him on Twitter @repdavidkustoff.

LINK to original story. 

By Congressman French Hill (R-AR) 

Washington, D.C.'s idea of government may have changed, but the American people's has not. This is a significant observation I have made since returning to Washington after living and working for 25 years in central Arkansas.

In Washington, accountability has gone from a focal point of governance to a relative afterthought.

The rest of America doesn't approve of Washington's dismissal of accountability. When I'm home in Arkansas, I haven't met very many people--if any--who have told me they don't agree with the idea that our government needs to be accountable to the people; likewise, I haven't met many people who said they disapprove of our constitutional system of checks and balances.

Yet inside "the Beltway" of our federal government, there is this inexplicable movement to enshrine anti-accountability policies and agencies into law. When I was a young Senate staffer in the 1980s, accountability was a fully and wholly bipartisan endeavor. In 2017, now even accountability can have a partisan taste to it, or at least that is what the battle over the Consumer Financial Protection Bureau (CFPB) has shown.

The CFPB has become arguably the least accountable government agency.

The director can be fired only for "inefficiency, neglect of duty, or malfeasance," and because the CFPB is an independent agency located within the Fed--which also amazingly has no authority over the agency--and is not subject to the appropriations process, neither the administration nor Congress has a say over the CFPB's actions.

Last September, a federal appeals court ruled CFPB's organizational structure unconstitutional and said that its unelected director "enjoys more unilateral authority than any other officer in any of the three branches of government of the U.S. government, other than the president."

Consumer protection is of the utmost importance, and prior to the creation of the CFPB, the government at both the state and local level had extensive consumer-protection laws and regulations in place and agencies fully tasked with their enforcement. And never in my long community banking career did I see a financial regulator shirk their consumer protection responsibility.

The massive amounts of raw consumer data the CFPB collects, its foray into areas it was specifically prohibited from regulating including auto lending and the practice of law, and the lavish renovation of its leased headquarters--which is costing taxpayers over $200 million--only underscore the need for intensive accountability and transparency.

But as the evolution of Washington has gone, none of that matters; only messaging matters. Defenders of CFPB essentially argue that with an agency named for consumer financial protection, how could it be anything but a good steward of consumer needs and protections? We don't apply that standard to any other agency in government; having a consumer-friendly name doesn't absolve it from the necessity of standard congressional oversight.

When you pull back the curtain on this perceived irreproachable agency, you see something much uglier than its name might suggest.

But the worst part about the CFPB is that the agency's practices are actually harming consumers. By limiting, eliminating, or increasing costs on products that financial institutions can offer, the CFPB's practices are growing the ranks of unbanked and underbanked Americans. The Dodd-Frank Act and CFPB policies have increased the price of basic banking services and reduced the availability of short-term credit options for low-income Americans, continuing to push them into more expensive--and potentially unregulated--credit options. To illustrate this, before Dodd Frank, 75 percent of consumers could find "free checking." By 2015, just 37 percent of banks offer true "free checking."

CFPB's "Ability to Repay" and "Qualified Mortgage" rules also have made it more difficult for low- and middle-income borrowers to qualify for a mortgage, with some community banks exiting residential lending altogether due to the complexity and burdens of the rules. The "Know Before You Owe" rule, despite its name, has continued to cause consumer confusion and costly delays in the closing process, not to mention the billions of dollars the real estate industry spends in implementing the rule--resources that could have been extended as credit or directed toward product innovation.

Under the leadership of Chairman Jeb Hensarling, the House Financial Services Committee has proposed the Financial CHOICE Act, which will help increase consumer choice and access to affordable credit and capital for all Americans.

One of the main pillars of the CHOICE Act is to bring accountability back to Washington regulators, including the CFPB. The CHOICE Act will provide structural reforms to the CFPB, including making it subject to appropriations and requiring comprehensive cost-benefit analysis for rule-makings.

By creating checks and balances for CFPB, the CHOICE Act will make it more accountable to Congress and the American people so that it can effectively do the job it was designed to do--protect consumers.

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The CFPB began an investigation into Wells Fargo only after the bank contacted the agency and the Los Angeles city attorney had filed a civil complaint, according to documents released by the House Financial Services Committee.

Documents released by Chairman Jeb Hensarling included a May 8, 2015, letter from the CFPB to Wells in which the bureau says news reports in the Los Angeles Times and the city complaint have raised “significant concerns and questions” about Wells Fargo’s sales practices.

The letter, signed by CFPB regional director Edwin Chow, asked Wells for details on its sales practices and urged the bank not to destroy any documents.

“What a coincidence,” said Rep. Ann Wagner. “The CFPB was asleep at the wheel.”

Richard Cordray defended the agency during his semi-annual appearance before the committee today.

“We had had previous indications that there had been problems at Wells Fargo,” he said. “It wasn’t the L.A. Times article that tipped us off.”

Los Angeles Times – Republicans Attack Consumer Financial Watchdog as They Push For His Firing

Part of the GOP attack focused on the Wells Fargo case as they argued the watchdog agency “was asleep at the wheel” in identifying that the bank was creating unauthorized accounts and only got involved after the Los Angeles Times and Los Angeles City Attorney Feuer had uncovered the problems.

Politico Pro – CFPB Was Late to Wells Fargo Probe, Letters Suggest

The CFPB began an investigation into Wells Fargo only after the bank contacted the agency and the Los Angeles city attorney had filed a civil complaint, according to documents released by the House Financial Services Committee.

Documents released by Chairman Jeb Hensarling included a May 8, 2015 letter from the CFPB to Wells in which the bureau says news reports in the Los Angeles Times and the city complaint have raised “significant concerns and questions” about Wells Fargo’s sales practices.

Wall Street Journal – Republicans Blast CFPB, Alleging Slow Start to Wells Fargo Probe

The documents unveiled Wednesday showed Wells Fargo notified the CFPB on May 4, 2015, that it had received a civil complaint from the Los Angeles city attorney’s office and that the Los Angeles Times was planning to report on the complaint the following day.  On May 8, the CFPB told the bank that it was initiating a supervisory review, saying the materials received from the bank “raised significant concerns and questions about Wells Fargo’s consumer financial services sales practices.”

On March 3, 2016, the CFPB informed Wells Fargo that it had decided to initiate an enforcement process, a day after the bank started settlement negotiations with Los Angeles officials.

CNN Money – House Republican: President Trump, Fire CFPB Director Richard Cordray

Ann Wagner, head of the panel's oversight subcommittee, painted the CFPB as a latecomer in uncovering Wells Fargo's fraudulent sales practices. She repeatedly pressed Cordray to specify about when he prompted the agency's staff to begin its investigation of the San Francisco-based bank, suggesting the agency was "asleep at the wheel" until press reports emerged.

Other GOP lawmakers, including Sean Duffy and Hensarling, also chastised Cordray for failing to reply to dozens of subpoena requests, including one tied to Ally Financial for discriminatory pricing in the lender's auto loans, and for not certifying compliance with lawmakers' requests.

Morning Consult – Republicans Build Case Against CFPB’s Cordray, Cite Wells Fargo Scandal

Congressional Republicans on Wednesday ramped up their criticism of Consumer Financial Protection Bureau Director Richard Cordray, citing previously undisclosed documents they say contradict his timeline of the agency’s investigation of Wells Fargo & Co.’s consumer fraud scandal.

Wagner’s questioning focused on a previously undisclosed letter dated May 8, 2015, where the CFPB referred to an earlier civil complaint by the Los Angeles city attorney and a Los Angeles Times news story about Wells Fargo’s fake accounts.  That letter, she said, shows that the CFPB failed to take a leading role in addressing Wells Fargo’s issues.

The Hill – GOP Makes Case for Firing Consumer Bureau Chief

Republicans spent the more than five hours of the hearing making the case for Cordray’s dismissal.  They argued that Cordray’s CFPB routinely overstepped legal and jurisdictional boundaries and prized flashy, expensive fines over consumer freedom.

Multiple Republicans argued that the CFPB ignored signs of fraud at Wells Fargo before fining the bank more than $180 million last September for opening more than 2 million unauthorized accounts.

Reuters – U.S. Consumer Financial Protection Chief Defends Agency Before Congress

Republicans claimed the agency failed to detect wrongdoing at Wells Fargo & Co, relying on outside investigators and news reports to point out widespread problems with improper account creation.

“The CFPB was asleep at the wheel!” said Ann Wagner, a Missouri Republican.  The earliest the committee could determine the CFPB began to examine Wells Fargo was in May 2015, after the bank notified the regulator that the Los Angeles City Attorney was already pursuing a civil case, she said.

Yet the CFPB was front and center in September 2016 when the high-profile $185 million multi-agency settlement was announced.

HousingWire – Tensions Reach Boiling Point at CFPB Director Cordray’s Hearing

This semiannual hearing happened in the midst of controversy around the bureau and Cordray’s position.

Rep. Sean Duffy, R-Wisc., interrogated Cordray on his tenure at the CFPB, bringing up the fact that Cordray has already been at the bureau for five years and three months…meaning he will actually serve longer than his five-year term, which officially ends in July 2018.

Credit Union Times – Hensarling to Cordray: You Should Be Fired

He said that under Cordray’s direction, the CFPB has shown an “utter disregard” for protecting markets and has made credit more expensive.

“For conducting unlawful activities, abusing his authority and denying market participants due process, Richard Cordray should be dismissed by our President,” the chairman said.

USA Today – Alarm Raised Over ‘Suspicious Trading’ in Navient Shares

A congressional panel has found signs of “suspicious trading” in the stock of the nation’s largest student loan servicing company before the firm was hit with a federal lawsuit that might have sent shares plunging…Rep. Patrick McHenry, R-N.C., the vice chairman of the House Financial Services Committee, made the disclosure during a politically-charged session on the performance of the Consumer Financial Protection Bureau.

“Unfortunately, committee staff has learned of suspicious trading activity for the Navient Corporation the morning before the announcement of CFPB’s enforcement action,” McHenry said.  The disclosure came after McHenry asked CFPB Director Richard Cordray if he know of “any confidential leaks” that “led to insider trading.”

Boston Herald – House GOP Turns Up Heat on Elizabeth Warren’s Consumer Bureau

Hensarling and other lawmakers accused Cordray of failed leadership at an agency they said stifles business and is slow to respond to actual wrongdoing. The hearing comes as a federal appellate court in Washington reconsiders a ruling last year that the structure of the agency —­ which is headed by a director who can only be removed by the president for cause — is unconstitutional.

“You have a rotting agency,” said Rep. Sean Duffy, R-Wisc., referring to 2014 congressional testimony by CFPB employees claiming racial and sex discrimination and retaliation.

Rep. Ann Wagner, R-Mo., angrily accused Cordray of dragging his feet in probing claims of fraudulent practices at Wells Fargo, which resulted in the bank paying $185 million in fines last year. She noted that the CFPB’s involvement came after news reports and a separate probe by Los Angeles officials.

“The CFPB was asleep at the wheel — asleep at the wheel, Director Cordray — under your leadership!” Wagner said.

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Washington, D.C. is known for many things: Majestic monuments, smoky steakhouses, and wasteful bureaucracy at its worst. From the Environmental Protection Agency's crippling regulations to the Pentagon's $125 billion boondoggle, the swamp is full of critters. But no government agency is creepier or crawlier than the Consumer Financial Protection Bureau (CFPB).

It starts with the CFPB's structure. Normally, government agencies like the State Department and Environmental Protection Agency are overseen by Congress, which determines funding levels and monitors agency leadership for any red flags. Not so with the CFPB.

Created by the Dodd-Frank financial law in 2010, the agency receives its annual funding automatically as a portion of the Federal Reserve's budget, leaving Congress out of the appropriations process. Its director, Richard Cordray (pictured above), is a White House appointee who can only be fired by the president for cause, such as malfeasance or negligence.

Don't just take it from me. The Department of Justice (DOJ) recently filed court papers asking a federal appeals court to order the restructuring of the CFPB. The DOJ argues that the agency’s structure comes into a separation-of-powers issue, since Cordray isn’t sufficiently answerable to the president. In the DOJ’s words: “There is a greater risk that an independent agency headed by a single person will engage in extreme departures from the president’s executive policy.” The Justice Department also argued that the president should be able to fire Cordray at will.

Last year, the U.S. Court of Appeals for the District of Columbia Circuit described the CFPB as “unconstitutionally structured” and a “gross departure from settled historical practice.” The appellate court similarly ruled that Director Cordray possesses too much power. The agency's lack of accountability is so unprecedented that, this month, the House Financial Services Committee held a hearing called “The Bureau of Consumer Financial Protection’s Unconstitutional Design."

Then there's the politics. In 2016, the CFPB sent $16 million to GMMB - a Democratic consulting firm - to publicize the agency’s marketing materials. Jim Margolis, a senior partner for GMMB, served as a senior adviser to President Obama and Hillary Clinton’s 2016 campaign. Contracting almost exclusively through Margolis’ firm, the CFPB’s advertising spending represents 2.5 percent of its annual budget - eclipsing the Food and Drug Administration’s 2 percent annual budget. (Most federal departments and agencies spend less than 1 percent of their budgets on advertising.)

The eight-figure marketing budget makes you wonder: Why do most Americans know nothing about the CFPB? In a recent national telephone survey, 81 percent of respondents claimed they they didn't even know enough about the agency to form an opinion about it. Even Rohit Chopra, a former CFPB assistant director, admits that the agency doesn’t have “the most effective PR strategy.”

But the CFPB marches on, retaining Democratic consultants. Agency staffers are clearly on board: According to a review of Federal Election Commission data, 100 percent of campaign contributions made by the agency’s employees went to Democratic candidates in 2016. Consequently, the CFPB is tied for the country’s most politically biased federal entity - alongside the National Endowment for the Humanities, National Transportation Safety Board, and Peace Corps. Even the Obama administration’s Justice Department was more diverse in its political makeup.

The swamp has no need for rogue bureaucracies. Let's drain it.

Since I was first elected to Congress, I have fought to hold government agencies and Washington bureaucrats more accountable to Floridians and all Americans. Unfortunately, the Consumer Financial Protection Bureau (CFPB) continues to operate in a manner unaccountable to Congress, the president and American taxpayers.

You don’t have to take my word on this.

On October 11, 2016, the D.C. U.S. Circuit Court of Appeals found the CFPB’s leadership structure unconstitutional. In its decision, the court stated, “The [CFPB] Director enjoys significantly more unilateral power than any single member of any other independent agency[,] . . . power that is not checked by the President or by other colleagues. Indeed, other than the President, the Director of the CFPB is the single most powerful official in the entire United States Government . . . .”

This unsettling unilateral power, coupled with the inability for other arms of the federal government to review or disapprove of the CFPB’s actions, not only flies in the face of our government’s system of checks and balances, but also promotes rogue operations and regulations that have the potential to grossly alter our economy and harm the livelihoods of millions of Americans.

The CFPB was created by Democrats in response to the 2008 financial crisis as a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). This 2,300 page piece of legislation was sold to the public as a means to hold bad financial actors accountable, prevent future systemic failures of our financial system, and provide increased transparency and consumer protections for investors. President Obama promised Dodd-Frank would “lift the economy,” but once again, he gave the American people false hope.

Instead, in the years since it was enacted, the big banks have grown bigger, while community financial institutions are disappearing at an average rate of one per day. Consumer credit has tightened up, and low and middle-income borrowers are feeling these effects more than most.

Although many financial service providers are already regulated at a state and federal level, CFPB creates excessive red-tape for industries across the entire financial services spectrum without accountability to Congress. Dodd-Frank completely disregarded the important congressional appropriations process and specifically allowed the CFPB to receive its funding directly from the Federal Reserve’s operating expenses so the CFPB could operate outside of congressional oversight.

The CFPB’s authority to regulate financial services transactions is so expansive it goes well beyond banks and other depository institutions. The sole director is appointed to a five-year term and, once appointed, can set implement policies in whatever way he or she sees fit. To make matters worse, the CFPB lacks the internal checks and balances to which other independent regulatory agencies are subject to.

Instead of issuing clear and specific guidance, the CFPB uses enforcement tactics that financial institutions have to measure against their own practices and then somehow implement, often to the consumers’ detriment.

For example, the CFPB does not distinguish credit unions and community banks from large financial institutions and nonbank lenders. As a result, the CFPB’s broad and overly burdensome regulations are severely impairing these important community-based financial institutions by limiting consumer credit availability and choice, as well as increasing costs for credit union members and community bank customers. Additionally, new CFPB rules and regulations have prevented many new mortgage loans from being made, particularly for low and middle-income borrowers.

There is no question about it, we must start easing the regulatory burdens faced by our community financiers, and reign in the unilateral power the CFPB director has over hardworking taxpayers. As a member of the House Financial Services Committee, I am committed to working with my colleagues to enact legislation that holds the CFPB accountable to all Americans, and to ensure its actions stop harming the consumers it was charged to protect.

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U.S. Rep. Dennis Ross, R-Fla., was first elected to Congress in 2010. He is part of the congressional leadership as senior deputy majority whip. 

As the following article from Real Clear Markets points out, the unaccountable and unconstitutional CFPB shows utter contempt for constitutional due process rights and tramples on the rule of law.  This abuse may grab headlines, but it does not achieve justice and ultimately harms the very consumers the Bureau is supposed to protect.

“Prohibited by statute from regulating auto dealers, the agency targeted them anyway”

“Actions that were legal when PHH engaged in them became illegal through some after-the-fact interpretive magic by the bureau”

“CFPB violated due process”

“The bureau assumed away the statute of limitations”

Business As Usual at the CFPB Is Not Good for Consumers
By Hester Peirce & Vera Soliman
Real Clear Markets

There has been quite a bit of buzz surrounding the future of the Bureau of Consumer Financial Protection, or CFPB, as the priorities of the new administration begin to take shape. Some in Congress are calling for the CFPB’s director to be fired, others want to reform the structure and funding of the agency, and still others want to eliminate the agency altogether. Underlying all of these calls for change is the growing realization of just how far off the rails this fledgling agency has gone.

The calls for reform have not fazed the CFPB, which has assured the public that nothing has changed. When asked during a Wall Street Journal interview how the new administration might affect the bureau, Director Richard Cordray answered that “it really shouldn’t change the job at all.” A Journal report neatly summarized the sentiment: “CFPB chief Cordray says it’s still business as usual.”

What does business as usual look like? For the CFPB, it often means limiting Americans’ options in the name of consumer protection. The bureau, for example, proposed such onerous restrictions on small-dollar lenders that many of them might simply stop making loans. As our colleagues suggested in a comment letter on the rule, the CFPB would do well to familiarize itself with the deep financial struggles of small-dollar borrowers before further diminishing their already scant credit options.

Business as usual for the CFPB means compromising customer privacy, too. The bureau collects a lot of information from consumers. Its 2016 strategic plan set a goal of maintaining “a credit card database, including both summary and de-identified loan-level data, covering over 80 percent of the credit card marketplace.” There’s no reason to collect so much data, as a much smaller sample would suffice.

Business as usual for the CFPB also means ignoring the legal boundaries Congress set for the agency. Prohibited by statute from regulating auto dealers, the agency targeted them anyway by bringing enforcement actions against the companies to which the dealers sell their car loans. An internal memorandum obtained by Congress shows the CFPB gaming out different options for getting around the statutory prohibition without inviting “legal and political” fallout.

And the CFPB is looking to expand its authority beyond consumer financial products. The bureau is in a dispute with the Accrediting Council for Independent Colleges and Schools, from which it demanded reams of information related to “whether any entity or person has engaged or is engaging in unlawful acts and practices in connection with accrediting for-profit colleges.”

The district court judge, in denying the CFPB’s authority to investigate the accrediting process, cautioned that “Although it is understandable that new agencies like the CFPB will struggle to establish the exact parameters of their authority, they must be especially prudent before choosing to plow head long into fields not clearly ceded to them by Congress.”

The CFPB’s business as usual means changing the rules in the middle of the game. The case that landed the bureau in an ongoing constitutional crisis arose out of its decision to impose on PHH, a mortgage lender, a $109 million fine. To get to such a big number, the bureau reinterpreted the law; actions that were legal when PHH engaged in them became illegal through some after-the-fact interpretive magic by the bureau. The court explained, “even if the CFPB’s new interpretation were consistent with the statute (which it is not), the CFPB violated due process by retroactively applying that new interpretation to PHH’s conduct that occurred before the date of the CFPB’s new interpretation.” To make matters worse, the bureau assumed away the statute of limitations that made much of its case outdated.

Business as usual apparently means politicizing consumer protection as well. Former CFPB enforcement attorney Ronald Rubin described the bureau’s hiring decisions as being driven less by experience and merit than by factors such as the political affiliation of an applicant. Rubin points out that, although the CFPB made much of the Wells Fargo case, the real work was done by Los Angeles journalists and prosecutors. Last year, during a Senate Banking Committee hearing, Chairman Richard Shelby, R-Ala., noted that unauthorized accounts were opened at least as far back as 2011, and aptly asked, “Where were the federal regulators during these years?” He continued, “If there were ever a textbook case where consumers needed protection, this was it. How many millions of unauthorized accounts does it take before the CFPB notices? And while the bureau is billing this as the largest settlement in its history, it’s unclear whether it had any significant role in discovering or investigating the bank’s conduct.”

It’s no surprise that this unique agency—funded outside the appropriations process and led by a single, fixed-term director—finds itself in the middle of a heated debate over its future. For the sake of American consumers, let’s just hope its future is no longer business as usual.

By: Jeb Hensarling
Wall Street Journal
February 9, 2017

The Obama presidency placed no greater burden on America’s growth potential than the avalanche of regulations that smother the U.S. economic system. The most destructive and dangerous of the new regulatory bureaucracies created by the Democrat-dominated 111th Congress is the Consumer Financial Protection Bureau.

The CFPB stands with ObamaCare as a crowning “achievement” of Mr. Obama’s transformation of America. With unprecedented automatic funding provided directly by the Federal Reserve, the agency is unanswerable to anyone. Democrats chose to insulate it from Congress, the president, voters and the democratic process. The U.S. Circuit Court of Appeals for the District of Columbia noted as much in its recent PHH v. CFPB decision, which ruled the bureau’s governing structure unconstitutional. The court said the unelected CFPB director “enjoys more unilateral authority than any other officer in any of the three branches of government of the U.S. Government, other than the President.”

The CFPB is arguably the most powerful, least accountable agency in U.S. history. CFPB zealots have the power to determine the “fairness” of virtually every financial transaction in America. The agency defines its own powers and can launch investigations without cause, imposing virtually any fine or remedy, devoid of due process. It requires lenders essentially to read their clients’ minds, know and weigh their clients’ comprehension levels, and forecast future risk. It can compel the production of reams of data and employ methodologies that “infer” harm without finding any specific instance of harm or knowing violation.

The regulatory web spun by the CFPB can make every provider of financial services guilty until proven innocent, inviting selective enforcement and financial shakedowns. The CFPB is the embodiment of James Madison’s warning in Federalist No. 47 that “the accumulation of all powers, legislative, executive and judiciary, in the same hands . . . may justly be pronounced the very definition of tyranny.”

This tyranny has harmed the very consumers it purports to help. Since the CFPB’s advent, the number of banks offering free checking has drastically declined, while many bank fees have increased. Mortgage originations and auto loans have become more expensive for many Americans.

No corner of American finance is beyond the CFPB’s grasp, even auto dealers—which are specifically excluded from its jurisdiction by the Dodd-Frank Act. To dodge this legal constraint, the CFPB regulates auto dealers through enforcement “bulletins” on auto lenders, employing statistical analysis rather than specific acts to charge lenders with discriminatory lending. The race of borrowers is inferred based on the borrowers’ names and home addresses. Through this ruse they smear and shake down lenders.

The House in 2015 voted 332-96—with 88 Democrats in support—to force the CFPB to rescind its auto-lending guidance. Sen. Elizabeth Warren, the intellectual mother of the CFPB, led Senate Democrats’ opposition to the bipartisan bill. This is a sign the 52-member Senate Republican majority probably will be unable to overcome Democrat filibusters on legislation limiting the CFPB’s powers.

President Trump should immediately fire CFPB Director Richard Cordray, citing the president’s constitutional responsibility to take care that the laws are faithfully executed. A new director could first undo all harmful actions taken by the CFPB during the Obama era. He could then implement policies that actually benefit consumers, such as limits on class-action lawsuits wherein plaintiff law firms get fortunes but injured financial consumers get pennies.

The CFPB could also protect Americans from government abuses. A new director could penalize government bond issuers that fail to disclose unfunded pension liabilities. It could also put an end to government accounting and solvency standards that, if adopted by private companies, would result in fines or a firm’s closure.

Yet even with good policy, the CFPB would still be unconstitutional. For those who reject Sen. Warren’s view that the ends justify the means, the agency must be functionally terminated. Consumer protection can instead come through an accountable and constitutional process.

The Senate can achieve this with a simple majority vote. Dodd-Frank requires the Fed to fund all CFPB budget requests automatically—creating an estimated $6.6 billion funding stream over the next 10 years. Under a budget process known as reconciliation, the House Financial Services Committee, which I chair, and the Senate Banking Committee could be mandated to save $6.6 billion over 10 years of the budget. In the ensuing reconciliation bill the two committees could then direct the Fed to terminate CFPB funding. Senate Democrats could not filibuster the bill.

Congress could then transfer the CFPB’s consumer protection role to the Federal Trade Commission or back to traditional banking regulators, where it resided before the CFPB’s creation. A Senate point of order requiring 60 votes could be brought against these provisions, on the ground that they don’t belong in a reconciliation bill. The advantage of putting the restructuring language in the reconciliation bill is that if Democrats use the point of order to strike the language, they—not Republicans—would have elected to end all CFPB funding, leaving the new system of consumer financial protection to be decided in future legislation.

When Democrats sought to take consumer protection outside the democratic process, consumers were harmed by a reduction in competition. With fewer lenders serving fewer borrowers, fewer businesses employed fewer workers. A healthy economy is the first casualty of any war on credit, and a loan denied becomes a job lost. The CFPB has eroded freedom, trampled due process and killed jobs. It must go.

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