Financial Services Committee Chairman Spencer Bachus made the following statement during a Subcommittee hearing on the Consumer Financial Protection Bureau.
“The Consumer Financial Protection Bureau was the crown jewel of the 2,300-page Dodd-Frank Act that President Obama signed into law last July. This new bureaucracy, which will be headed by one person, a director as opposed to a board, will regulate providers of credit, savings, payment and other consumer financial products and services.
“The Dodd-Frank Act provides that all ‘covered persons’ and ‘service providers’ are under the jurisdiction of the Bureau. A ‘covered person’ is any person that engages in offering or providing a ‘financial product or service.’ A ‘service provider’ is any person who provides a material service to a “covered person.” Given these broad definitions, the CFPB’s authority depends upon the meaning of ‘financial product or service,’ but that term will be defined by the Director of the Bureau. In other words, a ‘financial product or service’ is anything the Director wants it to be, except for certain limited exclusions such as insurance and lending by auto dealers.
The Dodd-Frank Act also confers virtually unfettered discretion on the Director of the Bureau to identify financial products and services that the Director finds to be ‘unfair, deceptive, or abusive’ and ban them under a highly subjective standard that has no legally defined content.
“This broad and undefined authority makes the CFPB perhaps the single most powerful agency ever created by an act of Congress.
“The Dodd-Frank Act allows for the CFPB to draw funds from the Federal Reserve as the Director of the Bureau determines to be ‘necessary.’ There is a funding cap in place of 10% of the Fed’s operating expenses. In addition, if $500 million is deemed insufficient, the CFPB may seek appropriations of up to $200 million for a grand total of $700 million or more per year. By comparison, the CFTC had a budget of $169 million in 2010. The SEC had a budget of approximately $900 million. The FTC had a budget of less than $300 million in 2010.
“The President hasn’t even nominated a Director to head this agency more than six months after he signed the law creating the new Bureau. It is entirely sensible to limit the Bureau’s funding until we know more about the Bureau and its needs.
“Throughout the months of debate on the CFPB, House Republicans warned that a massive budget with no strings attached represented an unprecedented delegation of responsibility to a single unelected bureaucrat. The situation has been made worse as we are now more than six-months into Dodd-Frank’s implementation and we don’t even have a nomination for the CFPB Director. When asked about the timing of a nomination at a hearing last September, Secretary Geithner simply responded ‘soon.’ That was almost five months ago.
“I look forward to hearing Professor Warren’s testimony today about these concerns in particular.”
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