May 9, 2011
The House Financial Services Committee will soon consider several bills that would significantly undermine the Consumer Financial Protection Bureau’s (CFPB) ability to protect consumers from unsafe and abusive financial products. Consumers Union, the non profit publishers of Consumer Reports®, strongly urges you to vote against these bills that, if passed, would doom the CFPB to failure before it even begins its work.
H.R. 1121 (Bachus) would hamstring the CFPB’s ability to protect consumers by replacing its director with a five-member commission. A single director is the most efficient and effective way to run the CFPB. We can not afford to constrain the CFPB with an unnecessarily complicated bureaucratic structure that would slow down its decision making process and make it more prone to internal discord.
For years consumer advocates warned that subprime and other exotic mortgages lenders were putting homeowners at risk. It is now clear that the failure to act quickly and effectively to protect consumers from predatory lending practices played a key role in triggering a record number of foreclosures and the country’s deep recession.
H.R. 1315 (Duffy) would make it easier for the same banking regulators who failed to protect consumers in the past to veto rules developed by the CFPB. The bill would allow a simply majority of financial regulators on the Financial Stability Oversight Council (FSOC) to veto CFPB rules that are “inconsistent” with “safety and soundness,” a vague undefined standard. Rather than learning from the financial mistakes of the past, this legislation would return our country to an era when banking regulators cared more about a bank’s profitability than protecting consumers from unsavory financial products and practices.
Unlike other regulators, the CFPB’s rulemaking authority is already subject to a veto by other banking agencies. Under current law, a new rule developed by the CFPB may be vetoed if the FSOC finds that the rule puts the stability of our financial system at risk. This strikes the proper check on the CFPB’s authority without unnecessarily restricting its ability to protect consumers.
H.R.1667 (Capito) would postpone the date for the transfer of consumer functions to the CFPB (July 21) if the CFPB does not yet have a director in place. Delaying the transfer date until Senate confirmation of a director would unduly politicize and delay the operations of the CFPB. Such a change in the law may serve the interests of banks and other financial institutions, but does not serve the best interests of consumers who already have been waiting for almost a year for the CFPB to become operational. By comparison, the Office of Comptroller of the Currency (OCC) has been in the past and is currently operating without a Senate confirmed director and there has been no suggestion that its powers should be limited.
As we have seen from our most recent economic downturn, strong consumer protection is essential for a strong financial system. Consumers need a fully empowered regulator to protect their interests. We strongly urge you to oppose both bills. We welcome an opportunity to discuss these issues with you or your staff.
Senior Policy Counsel