CFPB / Regulation

Improving the Consumer Financial Protection Bureau

It has been more than two years since the creation of the Consumer Financial Protection Bureau (CFPB), a Dodd-Frank requirement intended to regulate financial services and to protect Americans from another financial crisis. Despite start-up challenges, lawsuits questioning its legitimacy, accusations that it is too powerful, and the controversial recess appointment of Director Richard Cordray, the agency is now an established regulatory component of government.

However, its efficacy is questionable. While it may be too early to tell what exactly the impact has been on vulnerable consumers, the Bipartisan Policy Center (BPC) is attempting to break up the partisan bickering with suggestions for future improvements. On Tuesday, September 24, the BPC held an event titled, “The Consumer Financial Protection Bureau Three Years Later: On Target or Missing the Mark?” It coincided with the release of the first bipartisan report evaluating the effectiveness of the CFPB, providing recommendations for both the agency and Congress that are focused on improving consumer protection and regulatory efficiency.

The two-person bipartisan panel featured Eric Rodriguez, Vice President of the National Council of La Raza (NCLR), and Rick Fischer, a partner at Morrison & Foerster, LLP. The speakers co-chair the Consumer Financial Protection Task Force of BPC’s Financial Regulatory Reform Initiative (the Initiative), and compiled the report in pursuit of an accurate analysis of what the agency is doing well and what it should improve. To accomplish this, they met with the CFPB, federal and state bank regulators, leading consumer advocates, and other relevant contacts in both banking and non-banking industries.

The report, named The Consumer Financial Protection Bureau: Measuring the Progress of a New Agency, includes more than thirty recommendations urging transparency and increased feedback from stakeholders. The panel’s top suggestions included soliciting outside commentary instead of relying on internal resolutions, increasing preparedness with regard to giving closing notices, and using the civil penalty fund for educational and outreach purposes.

Both Mr. Rodriguez and Mr. Fischer were critical of the CFPB’s inability to properly authenticate complaints. Mr. Fischer called it a matter of priorities, noting that the CFPB has a Q&A process that can accommodate dozens of languages, yet it has been unable to distinguish and publish legitimate complaints. The panelists also agreed on two areas where Congress should take action to improve the CFPB: creating an independent Inspector General position within the agency, and authorizing the CFPB to regulate auto loans issued by car dealerships. The former is considered likely, while the latter is considered very unlikely.

In closing, Mr. Rodriguez emphasized expanding consumer access to credit and ensuring that resources are directed toward innovation. Mr. Fischer stressed that the Initiative focused explicitly on what would improve the CFPB, and not how to restructure or eliminate it.

The young federal agency will face challenges going forward, yet improved efficiency and utility are clearly necessary in order to justify its regulatory burden. Continued bipartisan discussion, provided that reasonable metrics are set and achieved, would certainly prove more useful than strings of new lawsuits and unproductive arguments.