House Republicans Consider Proposals to Reform CFPB; Criticize Agency’s War on Fees

On March 9, the U.S. House Financial Institutions and Monetary Policy Subcommittee held a hearing entitled “Consumer Financial Protection Bureau [CFPB]: Ripe for Reform.” The memorandum released in advance stated the hearing would “examine the leadership structure, funding, budget, and operations of the CFPB and areas in which reforms are needed.” Predictably, during the hearings there was a partisan split on the proposed reforms, with Republican members attacking what they characterized as agency overreach in areas such as fee elimination and advocating drastic reforms up to total defunding, while Democratic members of the subcommittee largely supported the agency’s actions.

In his opening statement, Chairman Andy Barr (R) explained why, in his opinion, reforms were needed and introduced a bill to do just that:

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“[T]he CFPB operates outside of the congressional appropriations process, receiving its funding through the Federal Reserve (Fed), which also operates outside of the appropriations process, through an opaque formula. This denies Congress the use of its most powerful oversight tool — the ‘power of the purse.’ My bill, the Taking Account of Bureaucrats Spending Act, or the TABS Act, gives Congress back the power of the purse and its oversight power, reins in the unaccountable CFPB, and subjects the agency to the traditional appropriations process.”

Beyond the TABS Act, other reform bills discussed during the hearing included:

The CFPB Dual Mandate and Economic Analysis Act. This bill would establish the Office of Economic Analysis in the CFPB to review all proposed and existing rules and regulations. Additionally, the purpose of the CFPB would be revised to include strengthening private sector participation in markets, without government interference or subsidies, to increase competition and enhance consumer choice.

The CFPB–IG Reform Act. This bill would establish a separate Office of Inspector General for the CFPB.

The Consumer Financial Protection Commission Act. This bill would remove the CFPB from being funded by the Fed, convert the CFPB into an independent commission, eliminate the positions of director and deputy director, and establish a five-person commission appointed by the President and confirmed by the Senate.

Federal Reserve Loss Transparency Act. This bill would amend the Consumer Financial Protection Act of 2010 to prohibit the Fed from transferring money to fund the CFPB if the Federal Reserve Banks incur an operating loss, and amend the Federal Reserve Act to require the Fed to follow US GAAP.

Beyond reforming the structure and funding of the agency, the CFPB’s war on fees, most recently discussed here, was a hotly contested topic. Subcommittee member Blaine Luetkemeyer (R) accused Director Chopra of using so-called “junk fees” as an excuse to expand his authority. “[T]he fact that we now call them junk fees doesn’t mean it’s real.” Maxine Waters (D), ranking member of the House Financial Services Committee, defended the agency’s actions in the area stating, “[t]he CFPB has made major progress in supporting consumers, combatting discrimination and junk fees, holding large financial institutions accountable for repeatedly harming consumers, and so much more.”

The proposed reform bills have virtually no chance of becoming law with Democrats currently in control of the Senate and the White House. We see the introduction of these bills as markers for future activity by the Republicans when the political conditions are more conducive. Although ordinarily that would need to await the Republicans taking control of the White House and both Chambers of Congress, if the Supreme Court holds that the CFPB should be subject to Congressional appropriations in the CFSA case, most recently discussed here, the Democrats will need the Republicans’ cooperation in order to fund the agency’s ongoing operations. The Republicans appear to be setting forth the conditions of that cooperation through the proposed legislation discussed at this hearing.

A recording of the Subcommittee hearing is available here.