Be careful what you wish for concerning the CFPB

David Baumann, Editor, Washington CU Daily

The adage, “Be careful what you wish for; you just might get it,” is old, hackneyed advice.

But sometimes, it just fits. Take the case of the Consumer Financial Protection Bureau.

For several years, congressional Republicans and financial trade groups such as the old CUNA complained that the Dodd-Frank Act only allowed the agency’s single director to be removed for cause – to be more specific, for “inefficiency, neglect of duty, or malfeasance in office.”

They said granting the director that protection was unfair and downright unconstitutional.

The U.S. Supreme Court agreed and ruled in June 2020 that the director could be removed by a president for any reason, at any time. The director no longer operated as an independent agency operates. That effectively made the director a member of a president’s administration; the director was serving at the will of the president.

And because the president of the United States is a political officer, it made the director of the CFPB a politico.

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Now, the same folks who had complained about how insulated the director was, now are complaining that Rohit Chopra, the current occupant of the director’s chair, appears to be marching in lockstep with President Biden.

He’s become a captain in the war against so-called “junk fees,” charges that are added to airline tickets and tickets to sports events and concerts. Much to the chagrin of the financial services community, the administration has lumped overdraft fees, credit card late fees and not sufficient fund fees into the same category.

The financial services community is angry about that.

“CFPB policy is increasingly a direct reflection of the political party that holds the White House and not an impartial regulator that listens to the viewpoints of all stakeholders to ensure the best regulatory solutions for consumers are considered,” Lindsey Johnson, president/CEO of the Consumer Bankers Association, told a House subcommittee in March during a hearing on “Politicized Financial Regulation and its Impact on Consumer Credit and Community Development.”

Wait a minute. That’s what you folks wanted, wasn’t it? A CFPB director who was directly accountable to the president.

The Supreme Court decision apparently left the job half-done. Financial services trade groups really want the agency to be run by a commission funded through the annual appropriations process. The CFPB currently does not go through the annual appropriations process. Instead, it is funded by drawing money from the Federal Reserve.

Congressional Republicans have tried over and over again to change the structure of the CFPB, but they’ve run into one or two problems—getting 218 votes in the House of Representatives and 50—or more likely 60—votes in the Senate.

For instance, the House version of the Fiscal 2024 Financial Services appropriations bill. Remember, the House currently is in the hands of the Republican Party.

“The Committee believes the Dodd-Frank Wall Street Reform and Consumer Protection Act provides inadequate checks on the CFPB’s powers,” the Appropriations Committee wrote in its report on the legislation. “A commission ensures that multiple disciplines, experiences and perspectives are brought to bear on CFPB rules, policies and enforcement actions.”

What did the Senate version say about changes to the CFPB’s funding and structure? Nothing.

And what did the legislation that included the funding deal struck by the president and congressional leaders say about CFPB funding and structure? Nothing.

So, for the time being, the CFPB remains an agency funded by the Fed and run by a single director.

That could change later this year, depending on how the U.S. Supreme Court rules in a case it is considering.

The Community Financial Services Association of America, a trade group that represents short-term, small-dollar lenders, filed suit against the CFPB over the agency’s rule governing payday loans. At issue was the manner in which the agency is funded. The constitution requires agencies to be funded through appropriations, the association argued. Since the CFPB is not, all of the rules issued by the agency are void.

The association’s suit was filed in federal court in Texas. Why Texas? Well, judges down that way tend to be more conservative. And sure enough, a three-judge panel from the Fifth Circuit Court of Appeals sided with the payday lenders and declared the agency’s funding mechanism unconstitutional.

The U.S. Supreme Court heard oral arguments in the case in October. Several justices appeared to be satisfied with how the agency is funded. But that might not mean much, and the case could go either way.

No matter what happens with that case or what Congress ultimately does with the CFPB, one thing is clear: The agency that was intended by its supporters to be insulated from politics isn’t. Clearly, it never was.