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By Jeb Hensarling
December 12, 2017
There has been much news recently about who lawfully controls the Consumer Financial Protection Bureau, an appointee of Barack Obama or an appointee of Donald Trump. The CFPB may provide great political theater, but it represents profoundly bad government. Instead of allowing this controversy to devolve into another fight between the right and left, this should instead be a debate between what's right and what's wrong.
It's right to have a federal agency working to protect consumers and vigorously enforce the consumer protection laws as written by Congress. But it's wrong to have an unconstitutional agency making up its own laws, evading checks and balances, and often harming the very consumers it is supposed to protect.
The CFPB's structure was designed so onerously that the U.S. Court of Appeals declared it unconstitutional. Other than the president, the CFPB's director is "the single most powerful official in the entire United States Government," a panel of the U.S. Court of Appeals for the D.C. Circuit recently wrote. So powerful is the CFPB director that he alone can decide any consumer credit product is abusive and thus outlaw it. When it comes to our credit cards, auto loans and mortgages, no one unelected individual in a democracy should have the unbridled power to take them away.
When the Dodd-Frank ActI that created the CFPB was signed into law in 2010, many warned that the unprecedented level of unchecked power it vested in a single, unaccountable bureaucrat would lead to abuses and harm consumers. Regrettably, the warning proved prophetic.
For example, the CFPB director has taken action to regulate auto dealers even though the law specifically prohibits the CFPB from doing so. In the court case that declared the CFPB unconstitutionally structured, the director was found to have unilaterally reversed decades of accepted law regarding real estate settlements and then, outrageously, disregarded the statute of limitations to attempt to apply his autocratic, rogue standard retroactively. This isn't the rule of law, it is the arbitrary rule of rulers and it should concern all Americans.
Unaccountable to the consumers' elected representatives, the CFPB director has issued numerous regulations that harm consumers. As a result, some borrowers could pay $500 more in interest payments on auto and truck loans, according to an analysis by the Wall Street Journal. University of Maryland researchers found that CFPB mortgage rules cut middle-income borrowers "out of the mortgage market altogether." When the CFPB increases consumers' costs and reduces their options to get credit, is it really protecting consumers?
Seemingly blind to the harm the CFPB causes, zealous defenders of the bureau claim it is an effective cop on the beat and point to billions of dollars in fines it has levied against financial institutions as proof of its success. But the CFPB effectively operates as prosecutor, judge and jury. In the absence of due process, CFPB fines tell us little. Just like the number of criminal convictions in the absence of Miranda rights and Fourth Amendment search and seizure protections would tell us little.
Noteworthy, in the biggest banking scandal since the CFPB's inception, the Wells Fargo fraudulent accounts scandal, far from being a cop on the beat, the CFPB was asleep at the wheel. It was the Los Angeles Times and the L.A. City Attorney's Office that uncovered the fraud. The CFPB never investigated allegations of wrongdoing when they first came to light and fined the institution only after the L.A. City Attorney's Office reached a settlement.
It is clear that those on the left thought that making the CFPB the single most powerful and unaccountable government agency in our history was a fine idea when its director was appointed by President Obama. But now that President Trump has that legal authority, they are fighting tooth and nail to hold on to the CFPB's near dictatorial powers.
A better use of time would be to ensure this agency adheres to our basic American tenets of separation of powers, checks and balances, accountability and respect for due process.
The battle over the CFPB has never been about whether to effectively enforce long-standing consumer protection laws like the Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act. It has been about how to best protect consumers without taking away their choices, harming their competitive markets, and allowing unaccountable bureaucrats to unconstitutionally make their own laws.
Again, it is not about right and left, it is about right and wrong.