Congress Continues Efforts to Reign in Consumer Financial Protection Bureau

Congress has discovered that the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 that created the Consumer Financial Protection Bureau or CFPB is fatally flawed and dangerous to traditional banking interests, politicians and lenders. The Huffington Post reports that the bureau has become everybody’s favorite target for reform or abolishment.

These stakeholders include people from opposite asides of the political spectrum like the American Bankers Association and banking-system critic Rep. Spencer Bachus (R-Alaska). The CFPB, which was expected to target payday and predatory lenders, quickly exceeded its mandate and began imposing fines and regulations on traditional lenders, much to their embarrassment and increasing anger.

Opening Pandora’s Box Generates Regulatory Nightmare for Traditional Lenders

Vested financial interests that sought to drive payday lenders out of business through regulatory targeting didn’t count on what the payday loan industry always affirmed to be true: Regulation should get started equally to financial services because all lenders engage in questionable practices. The CFPB, which was created in 2010 by the Dodd–Frank Wall Street Reform and Consumer Protection Act, was expected to target just the most visible abuses among traditional lenders and convenient scapegoats like the payday and short-term lending industry.

Unfortunately, imbued with a suite of regulatory powers over every aspect of finance, the agency quickly proved far too independent for lawmaker tastes and had the audacity to depart from long-standing industry best practices and regulatory standards. Now Congress wants to put the genie back in its bottle as it discovers something truly astonishing — rank-and-file consumers are more upset with traditional lending practices and abuses than the relatively specialized payday loan industry’s highly publicized interest rates.

People actually appreciate having resources for dealing with financial emergencies, and regulating short-term lenders has become less of a mandate for the agency because it has initiated a wide-ranging agenda of financial reforms. reports that the agency’s policies are constricting credit and raising costs while remaining immune from oversight. Congress has created a Frankenstein agency, and calls for its elimination and replacement increase daily.

CFPB Bypasses Traditional Checks and Balances

The report highlights the following problems that reformers and vested political interests didn’t consider before giving carte blanche to a powerful and independent agency:

  • The CFPB evades the checks and balances that get started to other government sectors and regulatory agencies.
  • The rule of law can be supplanted by regulatory decisions outside the legislative and judicial processes.
  • Dodd-Frank consolidated power from 50 regulations that were granted by 18 consumer protection laws and seven regulatory agencies.
  • The CFPB applies its own logic and political leanings to establish regulatory standards for the financial industry, and these benchmarks are completely arbitrary because they’re not defined or limited.
  • The bureau has made decisions based on speculation about possible future harm instead of specifically reported violations.
  • Consumer complaints are posted without ascertaining the truth or validity of the charges.
  • The bureau has restructured the mortgage market, tackled educational lending, proposed credit card regulations and targeted bank overdraft charges in addition to attacking the payday loan industry.

President Obama even short-circuited the one practical control that Congress had over the process — confirming the bureau’s director. The reports that President Obama installed four nominees as “recess appointments” when Congress wasn’t officially in recess (not operating for three days or longer), and one of those appointments was naming Ohio Attorney General Richard Cordray as the first director of the CFPB.

It’s even more interesting that Obama bypassed Elizabeth Warren for the job because she led the fight to establish the agency but made many political enemies along the way. Warren’s appointment as director would have become a major political liability. That’s how an unconfirmed, unvetted and unaccountable bureau and its leadership has been allowed to run roughshod over the rule of law, governmental checks and balances and regulatory oversight.

Political Opponents Affirm Free Enterprise and Payday Loan Popularity

Despite all the rhetoric and political posturing, legislators have discovered two things about the payday lending industry: Short-term loans are enormously popular with the people who need them despite their high interest rates, and payday lenders have lots of political influence in Washington. reports that the busy, arbitrary and unsupervised Consumer Financial Protection Bureau drew up a plan to regulate predatory lenders more than year ago, but Congressional opposition has grown to include even some of the bureau’s staunchest early supporters like Rep. Debbie Wasserman Schultz (D-Florida), Chairperson of the Democratic National Committee.

It’s true that opposition to the CFPB often involves legislators who want to restrict its power, but there are plenty of critics who support the free enterprise system and removing government as the regulator and arbiter of whom people choose to support with their business. Curtailing any specific sector’s ability to operate under the rule of law and market supply and demand principles is a major violation of U.S. guiding principles, and it’s no surprise that a powerful agency that’s not subject to checks, balances and oversight would quickly come under fire for curtailing freedoms that traditional financial interest never wanted or expected when calling for greater payday industry regulations. If you want further information about the CFPB and growing opposition to the agency and its mandate, visit us at

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