The WasteWatcher: The Staff Blog of Citizens Against Government Waste

CFP-Bane: Warding Off the Unconstitutional CFPB

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


The Consumer Financial Protection Bureau (CFPB) has been, since its inception as the brainchild of then-Harvard professor and now Sen. Elizabeth Warren (D-Mass.), the nanny state bane of conservatives and free-market champions.

In his February 8, 2017 Wall Street Journal op-ed, “How We’ll Stop a Rogue Federal Agency,” House Financial Services Committee (FSC) Chairman Jeb Hensarling (R-Texas) described the CFPB, a creation of the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203), as “the most destructive and dangerous of the new regulatory bureaucracies created by the Democrat-dominated 111th Congress.”  This salvo is part of Chairman Hensarling’s ongoing fusillade against the agency.  The FSC Subcommittee on Oversight and Investigations (O&I) held a hearing on March 21, 2017, to “examine whether the structure of the CFPB violates the Constitution as well as structural changes to the Bureau to resolve any constitutional infirmities.”

The subject matter was quite reasonable and timely.

On October 11, 2016, the D.C. Circuit Court of Appeals decided, in PHH Corporation v. CFPB, that the bureau’s structure was unconstitutional.  Among other things, the agency is funded by the Federal Reserve, not Congress (and therefore not subject to congressional oversight), and the director cannot be fired by the president.  The court noted that:

At the same time, the Director of the CFPB possesses enormous power over American business, American consumers, and the overall U.S. economy.  The Director unilaterally enforces 19 federal consumer protection statutes, covering everything from home finance to student loans to credit cards to banking practices.  The Director alone decides what rules to issue; how to enforce, when to enforce, and against whom to enforce the law; and what sanctions and penalties to impose on violators of the law. … That combination of power that is massive in scope, concentrated in a single person, and unaccountable to the President triggers the important constitutional question at issue today.

According to O&I Subcommittee Chair Ann Wagner (R-Mo.), “Created under the Obama-era, ‘Washington knows best’ mindset, the CFPB is an unconstitutional behemoth that side-steps accountability to Congress and the President.  With an Imperial Director, the CFPB continually expands and overreaches its regulatory authority at the expense of American families who are desperate for economic relief.  It is time we hold Director [Richard] Cordray responsible and restructure the CFPB within the framework of our Constitution.”

Citizens Against Government Waste (CAGW) has inveighed frequently against the excesses of the CFPB, including naming Cordray as the July 2014 Porker of the Month.  The Porker “award” stemmed from, among other egregious actions, the director’s gross mismanagement of renovation costs for the agency’s headquarters building in Washington, D.C.  CAGW’s criticisms of the CFPB have ranged from the bureau’s bogus claims about discrimination in automobile loan financing to its behavior as, essentially, a federal shakedown artist.

Chairman Hensarling’s rejuvenated focus on CFPB comes amid plans for a major reform of Dodd-Frank, which will include placing the bureau “squarely under President Trump’s authority, according to a memo obtained by The Hill. … According to a staff memo outlining changes to his legislation, Hensarling plans to replace prior calls to establish a bipartisan commission at the top of the CFPB.  Instead, he wants to stick with the single director now in place, but put that person directly under the president’s authority.”

The proposed reforms are expected to be included in the new version of the Financial CHOICE Act of 2016, which Chairman Hensarling described as enabling “economic growth for all, and bank bailouts for none.”

Other CFPB reform efforts are underway, as well.  On February 14, 2017, Sen. Ted Cruz (R-Texas) and Rep. John Ratcliffe (R-Texas) introduced the “Repeal CFPB Act” (S. 370 and H. R. 1031) in their respective chambers of Congress to fully repeal the CFPB.

“Don’t let the name fool you, the Consumer Financial Protection Bureau does little to protect consumers.  During the Obama administration, the CFPB grew in power and magnitude without any accountability to Congress and the people, and I am encouraged by the actions President Trump has begun to take to roll back the harmful impacts of an out-of-control bureaucracy,” Sen. Cruz said.  “The legislation that Rep. Ratcliffe and I are introducing today gives Congress the opportunity to free consumers and small businesses from the CFPB’s regulatory blockades and financial activism, which stunt economic growth.”

Rep. Ratcliffe added that the “CFPB’s lack of accountability to the American people was quickly evidenced when – contrary to its name – it ended up hurting many of the very folks it was intended to help.  While Sen. Cruz and I have been sounding the alarm on the CFPB’s federal overreach for some time now, I’m optimistic at our renewed chances of advancing this effort with a willing partner in the White House.”

According to a staff memo, the legislation is a “simple, one paragraph bill that repeals Title X of Dodd-Frank … and reverts all supervisory, enforcement, and rulemaking authorities back to the seven agencies previously tasked with such duties. This bill would not eliminate any regulatory, supervisory, enforcement, or rulemaking authorities that existed prior to enactment of Dodd-Frank.”

In the event that the Cruz-Ratcliffe “full repeal” approach does not gain traction, an alternative exists.  On January 11, 2017, Sen. Deb Fischer (R-Neb.) introduced S. 105, the Consumer Financial Protection Board Act of 2017, to transition the CFPB to a five-member board of directors.  She had offered similar legislation in the two previous congresses.

According to Sen. Fischer, “For years, the bad decisions made by a single director at the CFPB have kept families locked out of economic opportunity.  My bill would prevent this misconduct by divesting the authority from one director to a five-member bipartisan board.  This much-needed structural adjustment would bring accountability to the bureau and give more Americans a chance to build their own businesses and provide for their families.”

Each of the five board members would be appointed by the president and confirmed by the Senate, with one of them being appointed by the president to chair the board.  Each would serve staggered five-year terms, with no more than three from the same political party.

In light of the probability that Sen. Warren would rally her fellow Democrats to prevent a repeal of CFPB, and notwithstanding Chairman Hensarling’s strategy to circumvent a likely filibuster through budget reconciliation (with its simple-majority threshold for passage of legislation), Sen. Fischer’s bill may more closely reflect the art of the achievable, given the current makeup of the Senate.

CAGW applauds even modest reform of this rogue agency.  But taxpayers will be far better served if the CFPB becomes CFP-Banned.

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