On December 14, 2012, the House of Representatives Committee on Oversight and Government Reform, Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs issued a scathing staff report entitled: The Consumer Financial Protection Bureau’s Threat to Credit Access in the United States. The report, from Committee Chair Darrell Issa and Subcommittee Chair Patrick McHenry, was a critique of the CFPB and it’s potential effects on restricting access to credit.
The report began by criticizing the regulatory structure and powers granted to the CFPB:
The CFPB, an unelected and unaccountable bureaucracy unlike any other government agency, has been given vast and vague regulatory authority over virtually the entire financial services industry. With its broad and sweeping power to regulate consumer financial products and services, the CFPB has been called the “most powerful agency in American history.” Despite its immense authority, the Bureau lacks the vital external and internal controls that ordinarily govern federal agencies. Even the most basic of constitutional safeguards – the Senate’s advice and consent power – was violated when President Obama installed Richard Cordray as CFPB director during a self-proclaimed “recess” of the Senate in January 2012. These circumstances have created the conditions for the CFPB to become a run-away financial regulator that is poised to add uncertainty and illiquidity to domestic credit markets.
The report focused on the possibility that the White House would seek to influence agency policy, limiting congressional oversight. It also found that despite the CFPB’s mandate, it structure reflected a “weak reliance on economics” and it did not do a standard cost-benefit analysis of policies.
The report also outlined the struggles for small businesses and consumers to access credit under current economic conditions. It found that the current state of the economy already contributed to a lack of access to credit and theorized that the CFPB could exacerbate this problem. The report discussed the Dodd-Frank mandate enabling the CFPB to prevent “unfair, deceptive, or abusive” practices and noted that the term “abusive” was undefined, creating an atmosphere of uncertainty for creditors in determining what services could be deemed illegal by the CFPB. Additionally, the report found that current CFPB proposals, including the rule to regulate international remittance transfers sent by individuals in the United States to consumers overseas and changes in mortgage regulations would cause smaller banks and credit unions to simply stop providing regulated consumer financial services and thus reduce consumer access to financial services.
Given the hostility reflected in the report, the CFPB may face challenges with congressional approval as it implements more policies in 2013.