Consumer Law & Policy Blog

Hensarling Bill Would Revamp the CFPB

House Financial Services Chair Jeb Hensarling has proposed a Republican alternative to the Dodd-Frank Act, to be called the Financial Choice Act.  The Committee's summary of the portions of the bill that affect the CFPB are as follows:

SECTION THREE: Empower Americans to achieve financial independence by fundamentally reforming the CFPB and protecting investors.

 Change the name of the CFPB to the "Consumer Financial Opportunity Commission (CFOC)," and task it with the dual mission of consumer protection and competitive markets, with a cost-benefit analysis of rules performed by an Office of Economic Analysis.

 Replace the current single director with a bipartisan, five-member commission which is subject to congressional oversight and appropriations.

 Establish an independent, Senate-confirmed Inspector General.

Representative Hensarling's speech about the bill can be found here.

 Require the Commission obtain permission before collecting personally identifiable information on consumers.

 Repeal authority to ban bank products or services it deems "abusive" and its authority to prohibit arbitration.

 Repeal indirect auto lending guidance.

SECTION FOUR: Demand accountability from financial regulators and devolve power away from Washington.

 Make all financial regulatory agencies subject to the REINS Act, bi-partisan commissions, and place them on the appropriations process so that Congress can exercise proper oversight. (Exception: Fed monetary policy.)

 Impose an across-the-board requirement that all financial regulators conduct a detailed cost-benefit analysis of all proposed regulations.

 Reauthorize the Securities and Exchange Commission (SEC) for a period of five years with funding, structural, and enforcement reforms.

* * *

Institute significant due-process reforms for every American who feels that they have been the victim of a government shakedown.

  Repeal the so-called Chevron deference doctrine.

 

 

David Zaring: Payday Lenders’ Fight Against Regulator Would Be a Long Shot

In the Times's DealBook.  Excerpt:

Conservative lawyers have been muttering about the constitutionality of the Consumer Financial Protection Bureau for years, but their best argument is pretty novel.

It is a “death by a thousand cuts” separation of powers claim. The idea is that if you count up all the ways that the Consumer Financial Protection Bureau has been given unfettered authority to regulate the way that financial services are provided to consumers, you get an agency that is not controlled by Congress or the president.

That, in turn, is inconsistent with our baseline separation of powers principles, where Congress guides agencies by passing laws and appropriating budgets, and the president makes sure that they are executing on their missions.

How Would a Consumer Financial Protection Commission Differ From the CFPB?

by Jeff Sovern

According to a report in HousingWire, a CompassPoint report concludes the following:

“Our channel checks estimate that shifting the CFPB’s governance from a directorship to a commission would double the bureau’s already elongated rulemaking timeline, cut its enforcement activity by 50% to 75%, and result in a far greater importance being placed on supervision,” Compass Point’s analysts noted.

No wonder the industry wants a commission; delays in rulemaking and substantial cuts in the enforcement actions that have already recovered more than $11 billion for more than 25 million consumers.

MacDonald Article Calls for Judicial Review of CFPB's Non-Legislative Rules

Kevin M. McDonald of VW Credit, Inc. has written Who's Policing the Financial Cop on the Beat? A Call for Judicial Review of the Consumer Financial Protection Bureau's Non-Legislative Rules, 35 Review of Banking and Financial Law, 224 (2015-2016).  Here's the abstract:

This law review article addresses administrative power in the context of financial services. The Dodd-Frank Act created the Consumer Financial Protection Bureau (CFPB), an independent executive agency, to oversee this space. The CFPB issues interpretations and other guidance documents of consumer financial regulations it administers. This article discusses whether courts should defer to the CFPB's issuances in certain contexts. The claim in this article is that courts should not defer to the Bureau's interpretations and other regulatory guidance documents that seek to interpret regulations the CFPB administers. This article argues that the CFPB has been issuing "legislative," or "substantive" rules while avoiding the notice-and-comment process. This practice by the CFPB has been used to regulate fair lending in the context of automotive finance. Through a case study of Ally Financial, Inc., this article illustrates how the Bureau has enforced its interpretation of fair lending through adjudication of its own interpretations. 

 

LA Times: Obama's consumer protection legacy defined by aggressive agency

Here.  Here's the beginning of the piece:

Bill Doak and his wife, Linda, were preparing to buy a new house this spring when a mortgage broker made an ominous declaration after scanning their credit report: “Oh my God, you’re in trouble.”

The couple discovered five late payments on the loan on the home they were selling in Springfield, N.H. That threatened to cost them at least a percentage point more in interest for a mortgage in their native Connecticut, where they planned to retire.

 Doak, 63, said he quickly identified the source of the trouble: a snafu last year when their servicer, Nationstar Mortgage, gave them incorrect information about the timing of an escrow increase.

Fixing the problem was much more difficult. After at least 15 calls to Nationstar in a month with no progress, Doak went to an attorney who filed a six-paragraph online complaint with the Consumer Financial Protection Bureau.

“Within five days the thing was resolved,” Doak said of reaching out to the agency. “What they did for me was just simply amazing.”

Launched in the wake of the 2008 financial crisis, the bureau is one of President Obama’s signature accomplishments.

The article has some great quotes and is worth reading in its entirety.

RollCall: Wall Street Eyes Dodd-Frank Changes in Spending Bill

by Jeff Sovern

Here.  Excerpt:

The draft bill approved by the House Appropriations Financial Services Subcommittee on Wednesday included a provision that would change the CFPB from a director-led agency to a bipartisan commission, as well as language that would make funding for the bureau subject to the annual appropriations process. Both measures largely pit supportive Republicans against Democrats.  

Richard Hunt, president and CEO of the Consumer Bankers Association, said Democrats should find such changes palatable with the possibility of presumptive GOP nominee Donald Trump winning the presidency.  

CFPB Director Richard Cordray’s term expires in 2018, when the next president could install someone hostile to financial regulations, Hunt said.

Anyone who thinks this will aid consumers should ask why the FTC hasn't issued the auto dealer regulations Dodd-Frank authorized it to write.  Of course, the FTC has a commission structure and its budget is subject to the appropriations process. 

 

National Law Journal Report on Law Prof Letter Supporting CFPB Arbitration Rule

Here (behind a paywall, unfortunately).

House Continues War on Consumer Protection

by Jeff Sovern

The House Committee on Appropriations Subcommittee on Financial Services has released the draft of a bill it is considering that would hamstring the CFPB and at least temporarily preserve pre-dispute arbitration clauses, among other things. Here is how the Subcommittee describes the CFPB portion of the bill:

The bill includes a provision to increase oversight over the CFPB by bringing funding for the agency under the annual congressional appropriations process, instead of direct funding from the Federal Reserve. This change will allow for increased accountability and transparency of the agency’s activities and use of tax dollars. The legislation also changes the leadership structure of the CFPB from a single Director to a five-member Commission, and requires the CFPB to study the use of pre-dispute arbitration prior to issuing regulations.

210 Law Profs File First Comment on CFPB Arbitration Proposal

Here.

ALTA Survey Finds Increase in Consumer Review of Mortgage Disclosures Under New TRID (TILA/RESPA) Disclosures

by Jeff Sovern

A press release is here. ALTA is the American Land Title Association. I haven't read the study (I couldn't find the actual report of the study on the web site), but it reports an increase in consumers who read the mortgage disclosures from 74% to 92% since the TRID disclosures went into effect. The study also found that the new disclosures produced only minimal closing delays. It would be interesting to know more about how much and what consumers take away from the disclosures; I doubt, for example, based on past studies, that 92% of the respondents spent enough time on the disclosures to understand fully their obligations. Still, the direction of the increase in the percentage of consumers reading them is definitely encouraging and the amount of that increase is a victory for the CFPB's mortgage disclosures.