House Panel Seeks Comment on Draft Legislation to Overhaul CFPB
Commentary by Steven Lofchie
The House Committee on Financial Services requested public feedback on a discussion draft of legislation that would restructure the governance, rulemaking, supervision, and enforcement of the Consumer Financial Protection Bureau ("CFPB").
In the discussion draft, released following a full committee hearing on the future of the CFPB, the committee proposed reforms across five titles to reshape the agency's structure and powers.
On governance, the draft legislation would bring the CFPB under the congressional appropriations process and establish a dedicated CFPB Inspector General. The proposal would also reform the use of civil penalty funds, strengthen cost-benefit and small-business impact analyses for rulemakings, and require periodic retrospective reviews of major regulations.
To address procedural fairness, the draft would clarify the CFPB's authority to regulate unfair, deceptive, or abusive acts or practices ("UDAAP"). The legislation would add procedural safeguards for enforcement actions, clarify statutes of limitations, and address jurisdictional boundaries involving attorneys and state-regulated insurance companies.
On supervision and enforcement, the draft would adjust supervisory thresholds for banks and credit unions, allow certain institutions to elect prudential-regulator supervision for consumer compliance, and tighten the CFPB's authority to supervise nonbanks. The proposal would also reform civil money penalties, market-monitoring authorities, and complaint procedures to reduce the agency's reliance on enforcement actions to establish regulatory policy.
Finally, the draft would provide regulatory clarity for small-dollar loan products offered by depository institutions. It would also require agencies to clearly distinguish non-binding guidance from legally enforceable requirements.
Commentary
This is all overdue. It is remarkable, and not in a good way, that the Dodd-Frank Act afforded the CFPB such substantial authority to determine its own funding without congressional approval.
That authority has proven a double-edged sword for an agency that lacks bipartisan support. Under the prior administration, it could spend largely unchecked; under this one, the wolf is at its door.