At 3 years old, the controversial Consumer Financial Protection Bureau has survived opponents’ attempts to dismantle it and is busy rolling out new regulations and doling out punishment to companies accused of bilking consumers.
But the bureau also is wrestling with some embarrassing problems, including an inspector general report that criticized $216 million in renovations of rented office space as improper and an investigative report by American Banker that revealed that the bureau’s white employees were twice as likely as minorities to receive positive performance reviews.
Data collection by the bureau for research and as part of a database of consumer complaints also has drawn the ire of critics, who complain it’s an invasion of privacy. The bureau counters that it doesn’t collect any personally identifiable information.
The growing pains have attracted negative attention in Congress and could cause further headaches for the bureau, which likely will come under renewed fire if Republicans take over the Senate after the November elections.
A Republican Senate could schedule votes for a long list of bills passed by the House of Representatives over the past few years, said Rep. Patrick McHenry, R-N.C. McHenry said a political power shift also would focus increased scrutiny on what he sees as the bureau’s mismanagement.
“If you have a Senate that’s willing to take up and debate legislation, I think you can actually move reasonable policy forward,” said McHenry, a member of the House Financial Services Committee, which monitors the bureau. “But in the environment of the last few years, the Senate has done next to nothing, and I think that needs to change.”
Although the president can veto any bills that land on his desk, McHenry said Barack Obama will come under mounting pressure to go along with at least some of them. “Otherwise he looks completely unreasonable,” he said.
Democrats and consumer advocates say McHenry and the bureau’s opponents in the financial industry are trying to use the overpriced office renovations and allegations of discrimination to take the bureau down a notch.
“The attacks on the bureau have increased because powerful special interests don’t like the idea of a regulator with only one job: protecting the consumers,” said Ed Mierzwinski, federal consumer program director for the advocacy group U.S. PIRG. “We’ve never had a regulator that works for consumers in the financial marketplace. The CFPB is the first one, and the regulated don’t like a regulator who is not in their pocket.”
Rep. Emanuel Cleaver, D-Mo., said that while he’s concerned about the bureau’s recent missteps, the problems aren’t unique to the agency and are being addressed.
Cleaver complained that his Republican colleagues on the Financial Services Committee seem to have an “irrational distrust” of the bureau.
“Almost as if it is a monster seeking to devour the entire country,” he said. “Some members of the committee are, I think, obsessed with it. . . . No federal agency has been attacked with such vigor since the Society Security Administration was approved by Congress.”
Created by the 2010 Dodd-Frank Wall Street overhaul, the Consumer Financial Protection Bureau has regulatory powers over mortgages, credit reporting, debt collection and payday loans, among other consumer financial products and services.
Republicans who failed to stop the establishment of the bureau in 2010 subsequently turned energies to restructuring it, pushing legislation that would change its single directorship to a multimember commission, transfer some of its powers to other regulators and make its budget subject to the congressional appropriations process.
When the Democratic-controlled Senate failed to take up those bills, House Republicans drafted others that consumer advocates complained were designed to hobble the bureau.
One bill, for example, would require the bureau to provide public notice and comment prior to issuing any informal guidance, a process that usually only applies to legally binding regulations. Other bills would restrict employee salaries or place limitations on data and funds the bureau collects.
The bureau, meanwhile, is forging ahead. Its director, Richard Cordray, won a lengthy confirmation battle earlier this year and is firmly ensconced for a five-year term. At a Senate hearing last week, he touted the bureau’s achievements, telling lawmakers that 15 million Americans have received a total of $4.7 billion in compensation as a result of the bureau’s enforcement actions against the illegal practices of credit card companies, banks and other financial service providers.
While the bureau is no longer at risk of being dismantled, it remains under siege, said Ira Rheingold, executive director of the National Association of Consumer Advocates.
“They couldn’t kill the agency, so now they’re going to try death by a thousands cuts,” Rheingold said.
“What we see in the House and even the Senate is the banks’ attempt to chill the bureau’s behavior, whether it’s through the constant haranguing, the constant monitoring or the incredible amount of lobbying that they do,” he said. “If the Senate flips, you’ll just get more of it.”
Sometimes the bureau stands up and fights back, Rheingold said, but sometimes the staff keeps their heads down and don’t attempt to do something that could create a firestorm.
Rheingold and other consumer advocates are watching the bureau’s next moves on two key issues: New regulations for payday lending and a study that could lead to rules restricting the financial industry’s use of arbitration clauses. Such clauses force consumers to resolve disputes outside the court system.
Industry lobbyists say that no matter what happens in November, the fight over whether the bureau should exist is over. But they say they want more transparency and accountability.
“It’s established, it’s set up, and in a lot of ways it’s working. Whether it could work better in the future is something that we’re going to work on,” said Francis Creighton, executive vice president of government affairs for the Financial Services Roundtable, a trade group representing the world’s 100 biggest financial companies.
“This industry is not about trying to get rid of the CFPB or significantly scale it back,” he said. “We’re trying to make it better.”