Consumer Financial Protection Bureau Director Richard Cordray sat down in front of the House Financial Services Committee for a hearing last week, delivering the bureau’s semi-annual report and taking questions. Among the many parties interested in Cordray’s responses was the Competitive Enterprise Institute, a non-profit public policy organization based in Washington, DC that has long been a vociferous critic of the CFPB. The organization offered a few questions of its own for Director Cordray.
Question 1: What is so special about consumer financial protection that makes the CFPB immune to meaningful government oversight?
CEI notes that Congress has no “power of the purse” over the Bureau. Also, the President may only remove the director “for inefficiency, neglect of duty, or malfeasance in office.” Finally, the federal judiciary is handcuffed by the express language of Dodd-Frank that requires courts to give deference to CFPB actions.
Question 2: Has the CFPB conducted any cost-benefit analysis of its actions as required by Dodd-Frank?
Section 1022 of the Dodd-Frank Act requires the CFPB to consider “the potential benefits and costs to consumers and covered persons, including the potential reduction of access by consumers to consumer financial products or services” when it is considering a rule. CEI claims that no such analysis has ever been published by the bureau, and a perusal of the bureau’s website reveals no articles or posts that discuss any cost-benefit analysis.
Question 3: What response does the CFPB have to the common critique that its oversight is crippling small banks?
CEI adduced multiple sources discussing the difficulties faced by small banks in complying with the many stipulations in a law that approaches 900 pages. Smaller banks are forced to spend more on compliance, merge with other banks to acquire existing compliance talent, or simply close. CEI cited FDIC statistics to indicate that the number of small community banks has decreased 12.4 percent since 2010, with the smallest banks decreasing more than 18 percent.
Question 4: Does the CFPB support current legislative efforts to clarify auto loan industry lending guidelines?
Although Section 1029 of Dodd-Frank explicitly excludes the auto loan industry from CFPB oversight, the bureau has issued guidance to the lenders that work with auto dealers. These lenders have been warned they could be found in violation of the Equal Credit Opportunity Act if the CFPB determines that the dealers they worked with were engaged in discriminatory lending. This indirect regulation has been complicated by the controversial method employed by the CFPB in analyzing loan data, which has been found to severely over-estimated the number of minority consumers supposedly harmed.