A House subcommittee hearing on Feb. 8 gave the banking industry a chance to comment on three bills that would make changes to the Consumer Financial Protection Bureau.
Michael J. Hunter, chief operating officer of the American Bankers Association, testified at the Financial Institutions and Consumer Credit Subcommittee’s hearing.
One of the bills under consideration is H.R. 1355 (Bureau of Consumer Financial Protection Accountability and Transparency Act), which would move the CFPB to the Treasury Department and subject the CFPB to the same congressional authorization, budget and appropriations process as the Treasury Department. Under Dodd-Frank, the Federal Reserve transfers funds that the CFPB requests, up to a certain percentage of the Fed’s operating expenses.
The CFPB’s budget for fiscal year 2013 is $597 million.
In his testimony, Hunter said the two key questions addressed by H.R. 1355 are: how to assure accountability of decisions and set appropriate limits on the Bureau’s authority; and how to assure that the Bureau’s funding is used effectively and disclosed fully.
“ABA has long advocated the use of a commission or board structure to accomplish this,” he said. “We believe such a structural change would provide an effective check and balance.”
Hunter also offered perspective on H.R. 2081, which would remove the CFPB Director from the Board of Directors of the FDIC and replace him with the Chairman of the Federal Reserve Board.
He explained that the FDIC board had been expanded from three members to five to add the Office of Thrift Supervision to the board when the separate thrift insurance fund was merged into the FDIC.
“The regulator with that responsibility and expertise is now the OCC after Dodd-Frank’s reorganization, not the Bureau. There may be several rationales for filling the vacated seat, but none are true to the original purpose to warrant an automatic substitution of the Bureau for the OTS,” Hunter said.
The third bill is H.R. 3871, the Proprietary Information Protection Act of 2012, which would provide legal certainty that the disclosure of privileged information requested from financial institutions by the CFPB does not waive attorney-client privilege and open up the institutions to third-party subpoenas.
CFPB Director Richard Cordray has signaled the CFPB’s intent to issue a regulation on this issue, but “supplying a statutory confirmation of the protection of privilege would help alleviate needless uncertainty,” Hunter testified.
Additional testimony came from Andrew J. Pincus, partner at Mayer Brown, on behalf of the U.S. Chamber of Commerce; Chris Stinebert, president and CEO, American Financial Services Association; and Arthur E. Wilmarth Jr., professor of law at George Washington University.
Stinebert testified that the original proposals to create the Bureau – including the administration’s proposal and the Wall Street Reform and Consumer Protection Act of 2009 – structured the CFPB’s leadership as a commission rather than a single director, similar to the Federal Trade Commission.
“The complexity, impact and lack of congressional oversight over the Dodd-Frank Act is merely
one example of a broken regulatory process,” said Stinebert, whose organization represents the consumer credit industry.