House Committee holds markup of CFPB bills

by Ballard Spahr LLP

On Tuesday, June 10, the House Financial Services Committee held a markup to discuss several bills designed to promote greater transparency and accountability at the CFPB.  In his opening statement, Chairman Hensarling characterized the CFPB as a “uniquely unaccountable agency,” and emphasized that “regardless of how noble a purpose an agency may have, it does not mean that it is not in need of accountability and transparency.” The full Committee discussed the bills and made the following changes and resolutions:

  • H.R. 3389, the CFPB Slush Find Elimination Act of 2013, mandates that civil money penalties paid by CFPB targets be remitted to the Treasury. The bill was amended to restrict the use of civil penalties for the sole purpose of compensating harmed consumers and not for any other agency functions, and was passed by a recorded vote. Some Committee members vigorously criticized the bill as undermining the CFPB’s efforts to promote financial literacy. In response, Chairman Hensarling argued that the restriction was necessary to eliminate the CFPB’s use of these funds for operating costs in addition to its budget, and thus curtailing “a dangerous practice which creates a perverse incentive” for the agency.
  • H.R. 4604, the CFPB Data Collection Security Act, was passed by a recorded vote. The bill would allow consumers to opt out of the CFPB’s data collection and would restrict the agency’s data-handling methods, by creating a 60-day limitation on agency-held data, requiring “confidential” security clearance for employees who will be accessing the data, and mandating one year of free credit monitoring for consumers in the event of a data breach. The objective of the bill, as explained by Rep. Westmoreland (R-GA), is to make the CFPB, an agency unaccountable either to the President or the Congress, accountable to consumers. Rep. Duffy (R-WI) analogized the CFPB to the National Security Agency (NSA) in the vastness of personal data collected, and suggested that this bill will help prevent NSA-like unauthorized collection of private information in the future.
  • H.R. 4262, the Bureau Advisory Commission Transparency Act, was passed by a voice vote with little debate. Some Committee members argued that the bill is moot, given Director Cordray’s recently announced open-door policy for advisory board meetings. However. Mr. Duffy insisted on the legislative mandate to ensure that the policy stays in place, especially since Director Cordray has never conceded that the CFPB is subject to the Federal Advisory Committee Act.
  • H.R. 3770, the CFPB-IG Act of 2013, a bill that would create an independent Inspector General for the CFPB, was passed by a recorded vote. Rep. Waters (D-CA) proposed an amendment to eliminate Senate confirmation of the Inspector General that was rejected by the Committee. Rep. Stivers (R-OH) called this bill “common sense legislation” and emphasized the importance of an independent Inspector General to guide and counsel the “infant agency.” Rep. Wagner (R-MO) opined that had the CFPB had its own Inspector General, the employment discrimination issues that the CFPB is presently facing could have been prevented.
  • H.R. 4383, the Bureau of Consumer Financial Protection Small Business Advisory Board Act, received bi-partisan support. The bill would create an advisory board to advise and consult the agency on regulations and their effect on small businesses. After some discussion, the Committee approved an amendment which would ensure the appointment of minorities, credit unions, and banks predominantly serving traditionally underserved communities to the board.
  • H.R. 4539, the Bureau Research Transparency Act, was agreed to by a recorded vote with an amendment requiring redaction of certain sensitive data from the CFPB’s reports. Whenever the CFPB publishes a research paper, H.R. 4539 would require the CFPB to publish all studies, data, and other analyses on which the research paper is based. Some Committee members opposed the bill, contending that it will, in essence, constitute an unnecessary burden on the agency and will tie Director Cordray’s hands. However, Mr. Fitzpatrick (R-PA) stated that the bill would require the CFPB “to show its work.”
  • H.R. 4662, the Bureau Advisory Opinion Act, was amended to require the CFPB to make its advisory opinions public on the agency’s website with any sensitive information redacted. The bill was passed by a recorded vote. The Committee’s rationale is that public disclosure is a valuable source of information for businesses seeking guidance on compliance with the CFPB’s regulations. Rep. Waters (D-CA) found this bill to be very problematic, claiming that, in essence, the bill will limit the agency’s ability to do its job as it will be “inundated” with questions. Some Congressmen expressed concerns over rigid deadlines in the legislation that would require the agency to issue an opinion within 90 days after receiving an inquiry, with a single 45-day extension in certain limited circumstances. Others voiced concerns over the advisory opinion work taking agency resources away from consumer protection.
  • H.R. 4811, the Bureau Guidance Transparency Act, passed by a recorded vote, would require the CFPB to observe a notice and comment period before issuing regulations. The bill is aimed at improving transparency in the methodology, data, and decision-making processes of the agency. This bill has received widespread support from regulated industries, which frequently struggle to understand the CFPB’s regulations and the logic behind them.  Rep. Stutzman (R-IN) emphasized that this legislation will bring clarity, quality, and transparency to the work of the CFPB, and “a better government for all involved.” The bill would also rescind the CFPB’s indirect auto lending guidance (CFPB Bulletin 2013-02). The bill passed 35-24, and was one of the few bills discussed today to garner Democratic votes, specifically Rep. Scott (D-GA), Beatty (D-OH) and Horsford (D-NV).
  • H.R. 4804, the Bureau Examination Fairness Act, was passed by a recorded vote and would mandate several restrictions on CFPB examinations and prohibit the CFPB from including enforcement attorneys when performing examinations. Similar to the closed-door policy addressed by H.R. 4262, the CFPB has already ended the practice of bringing CFPB enforcement attorneys to examinations. The Committee felt a legislative mandate was nevertheless necessary to guarantee the CFPB would not change its mind.

All of the CFPB-related bills that were discussed at the markup were reported out of committee. The bills may now proceed to the House floor, but the timing on any potential vote is uncertain.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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