Congressional lawmakers continue to fight over the creation of the Consumer Financial Protection Bureau. The CFPB, which is intended to have regulatory jurisdiction over consumer finance, is supposed to start operations in July. So far, the rules over what it is allowed to do have not been established and it has no director.
Republicans trying to gut bureau before it starts operating
The Consumer Financial Protection Bureau, which holds regulatory sway over consumer credit like mortgages, credit cards and payday loans, is supposed to begin operations on July 21. However, Congressional Republicans are trying to dilute the regulatory powers that the CFPB is supposed to have once it begins operating, according to CNN. After a recent hearing in the nation’s capital, bills were introduced in the House of Representatives to change certain rules in how the federal agency will operate. Among proposed changes are to install a five member committee instead of a single director, easier Congressional override of any CFPB action, and to keep the CFPB from conducting any operations until a director has been appointed by the Senate.
Major objections to lack of oversight
Under the current rules, the CFPB would be an independent agency that would be funded by regulatory fees that banks pay to the Federal Reserve, according to MarketWatch. However, the formation of the organization has been repeatedly held up in Congress for a number of reasons. The most oft-repeated objections about the CFPB are that too much power would be placed in the hands of the director, and that Congress didn’t appoint Elizabeth Warren to set it up. Warren is not the head of the CFPB, but a special adviser that was handpicked by the President. However, the Treasury Secretary and Chairman of the Senate Banking Committee both announced their opposition to further restricting the bureau recent Congressional hearings, according to Bloomberg. Cynics could assume that the mere existence of another federal regulatory body is at least part of the objection.
Small banks against further regulation
A concern of small banks, community banks and credit unions has been that the new bureau could make it nearly impossible to keep the doors open, according to Reuters. Small banks have higher overhead and lower profit margins than their megalithic cousins. Bank of America and Wells Fargo are able to afford to pay fines easily, but community owned banking entities have a much more difficult time. Small banks depend on sources of revenue such as account fees and interest on short term loans just as much as large banks do, and higher costs of compliance will make operation more difficult for them. Not everyone wants to bank with corporate Goliaths.