House Republicans Renew Attack on CFPB, Calling it Unaccountable
Defenders of the CFPB cite its popularity
The intensely partisan fight over the operations of the Consumer Financial Protection Bureau flared again on Tuesday, as a key House subcommittee chairman accused Director Rohit Chopra of operating a rouge, out-of-control agency.
“The CFPB is increasingly out of control and lacks transparency because there are virtually no checks on the agency’s power,” Rep. Andy Barr, R-Ky., chairman of the House Financial Services Committee’s Financial Institutions and Monetary Policy Subcommittee, said at a hearing called to review the agency’s operations.
Barr added that the committee invited a CFPB witness to testify Tuesday, but he said the agency declined to provide a witness.
The Dodd-Frank Act created the CFPB and included a provision that the agency’s funding is provided by the Federal Reserve and not through the annual congressional appropriations process. That funding scheme currently is the subject of a Supreme Court case in which a trade association has challenged an agency rule, contending that the rule was issued by an agency whose funding was unconstitutional.
Barr agreed. “The CFPB was set up to ensure unbridled power for an authoritarian agency head who wants to exercise partisan and unreasoned control over financial services, with the ultimate goal of turning financial institutions into public utilities,” he charged. “Due to this lack of oversight, the CFPB has acted unilaterally and arbitrarily outside of its statutory mandate, routinely without engaging in notice and comment rulemaking and instead operating through rulemaking by guidance, press releases, or blog posts.”
In response, the subcommittee’s ranking Democrat, Rep. Bill Foster of Illinois, said that bipartisan polling shows that the CFPB is overwhelmingly popular. He said that one recent poll reported that 77% of Republicans supported it.
Rep. Maxine Waters, D-Calif., the ranking Democrat on the House Financial Services Committee, accused Republicans of continuing their “crusade” against the agency. “Democrats will always protect the CFPB,” she added.
One of the witnesses who testified Tuesday, Brian Johnson, served as deputy director of the CFPB during the Trump Administration, and is now the managing director of Patomak Global Partners, a financial services regulatory consulting group. He noted that the Dodd-Frank Act requires the CFPB to order an annual independent audit of its budget and operations.
Johnson criticized the agency’s most recent audit. He stated it is only nine pages long and contains “no description of the sampling methodology or scope of transaction testing performed by the auditor and identifies no exceptions nor makes any findings or recommendations.”
Another former CFPB official who testified, Chris Peterson, served in several positions at the agency during the Obama Administration. He took the opposite view of that audit, saying that there was no evidence of problems at the agency. “In the natural course of politics, we can all expect to have policy disagreements,” said Peterson, who is now a law professor at the University of Utah and is of counsel at Gupta Wessler LLP., a public interest law firm. “However, neither I nor the GAO uncovered any evidence of inappropriate financial behavior at the CFPB.”
Peterson disputed the notion that the agency’s funding is unconstitutional. “The fact that this law appropriated funds through an on-going mechanism does not render the law unconstitutional,” he said. “The general appropriations clause does not require Congress to use an annual appropriations process.”
Peterson also defended the CFPB’s final rule that lowers most credit card late fees to $8 for the nation’s largest card issuers. “Credit card late fees that exceed actual harm suffered by the card issuer are a form of punitive damages that, in effect, grant the bank a windfall every time working families trip up while struggling to make ends meet,” he said.
Peterson noted that Republicans have attacked that rule and are pushing a resolution to nullify it. He asked Republican subcommittee members a pointed question. “Don’t you have anything better to work on?”