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WASHINGTON – The CFPB – a uniquely unaccountable government bureaucracy – is harming consumers and abusing and exceeding its already immense powers, members of the House Financial Services Committee told the Bureau’s director during a hearing today.
The Dodd-Frank Act granted the Bureau broad powers to regulate consumer credit products, yet CFPB Director Richard Cordray is exceeding even that scope. For instance, as recent developments and the Committee’s two staff reports highlight, the Bureau spent significant resources attempting to regulate automobile dealers, even though those businesses are specifically exempted from the Bureau’s authority by Dodd-Frank.
The reports concluded the Bureau is actually harming the very consumers it intends to protect. Using internal Bureau documents, the reports reveal that the CFPB was able to secure a potentially “market-tipping” enforcement action against Ally Financial and its Ally Bank subsidiary because of “undue leverage” – the company needed Washington regulators’ approval for a broader restructuring of its business. The Bureau’s flawed distribution of settlement proceeds was also exposed, and internal Bureau documents showed that some white borrowers will receive settlement checks of alleged racial discrimination against African-Americans, Hispanics and Asians.
In addition, the Bureau is expected to soon propose a rule that will harm consumers by taking away their right to access small dollar, short-term loans. For many Americans, options are few when financial emergencies arise, and short-term, small dollar credit products are legal financial lifelines. All 50 states have the authority to enact, repeal or amend laws to regulate small dollar lending, and the Bureau has not been able to point to any specific state as deficient in law or authority to protect its consumers.
“Soon Mr. Cordray will presume to decide for all Americans whether he will allow them to take out a small-dollar loan to keep their utilities from being cut off or to keep their car on the road so they can go to work.Soon Mr. Cordray will decide whether he will permit Americans to resolve contract disputes through arbitration or simply hand over the keys to the CFPB’s luxury office building to the wealthy, powerful and politically well-connected trial lawyers lobby,” said Chairman Jeb Hensarling (R-TX).“In short, Congress has made Mr. Cordray a dictator.And when it comes to the well-being and liberty of American consumers, he is not a particularly benevolent one.”
Financial Institutions and Consumer Credit Subcommittee Chairman Randy Neugebauer (R-TX), said, “Federal agencies that are authorized to enforce federal law act appropriately when they take actions to hold unlawful actors accountable. However, when federal agencies routinely bring enforcement actions instead of undertaking rulemaking with the sole purpose of changing entire market behavior, it begins to look like deliberate evasion of public notice and comment.”
Key Takeaways from the Hearing:
- The Bureau is not accountable to Congress or the American people because it is not subject to checks and balances that traditionally apply to government agencies.
- Real consumer protection puts power where it belongs: in the hands of consumers, not a single Washington bureaucrat.
- The Bureau has an important mission. Properly designed and led, it is capable of great good. But when the Bureau acts without accountability or transparency, it is also capable of great harm to the consumers it is supposed to protect. As it infringes on consumer choice and economic freedom under the guise of consumer protection, Congress must protect the American people from overreach at the Bureau.
To watch Chairman Hensarling’s questioning of Director Richard Cordray and Director Cordray’s responses, please click here.
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