A recent report from the Treasury Department recommends significant changes to the structure and practices of the Consumer Financial Protection Bureau. The report comes as another voice in the debate currently roiling Washington over the bureau, with some calling for substantial reform or even abolition of the agency, and some championing it as essential.
The report, found here, lists the CFPB among many “numerous regulatory factors that are unnecessarily limiting the flow of credit to consumers and businesses and thereby constraining economic growth and vitality.”
The report cited the CFPB’s “unaccountable structure and unduly broad regulatory powers” in suggesting reforms to address the CFPB’s “regulatory abuses and excesses.” The Department cited fundamental issues with the CFPB it believes necessitate reforms. As it stands now, the Treasury asserts that the CFPB is not fulfilling its proper role. “The CFPB’s approach to enforcement and rulemaking has hindered consumer choice and access to credit, limited innovation, and imposed undue compliance burdens, particularly on small institutions,” the report said.
The specific issues include a lack of accountability to the executive or legislative branch of government, the CFPB’s failure to provide adequate notice to regulated parties, the CFPB’s heavy reliance on enforcement actions, and the relatively low amount of guidance issued. Further, the report expressed concerns over the bureau’s use of administrative actions to circumvent federal court procedures and applicable statute of limitations, the CFPB’s failure to adequately review outdated and unnecessary regulation requirements, and the CFPB’s failure to verify consumer complaints before including the information in its public database.
In response, the Treasury recommended specific changes to the bureau. First, to improve accountability, the Treasury recommends changing the governing structure of the bureau to a board or commission, as well as funding the bureau through traditional appropriations. Second, the Treasury calls for the bureau to clearly state its policy positions on all regulation issues, focusing less on enforcement and more on guidance. The Treasury would also prefer to see disputes between regulated entities and the bureau settled in federal court, rather than administrative actions. In addition, the report recommends a regular review of CFPB regulations for any that are outdated, unduly burdensome, or unnecessary. Finally, the Treasury calls for locking down the CFPB’s complaint database by restricting access to government agencies.
This report is the first of several that will be produced in response to an executive order from President Trump entitled “Core Principles for Regulating the United States Financial System.” More recommendations for the CFPB are likely forthcoming.