The Banking Industry's Transparent Attempt to Weaken the CFPB

You'll never guess who's going around Washington, trolling the halls of Congress, talking about the importance of protecting the long-term health of the Consumer Financial Protection Bureau.

The banking industry.

That's right: After years of trying to kill, then delay, and then defang the agency, the banking industry and their Republican friends in Congress have launched a new effort to attract Democratic support for their latest attack by claiming that they just want to help the agency and the consumers it protects. Surely Democrats will not be taken in by yet another attempt to weaken the CFPB.

The latest industry-sponsored bill would fundamentally change the structure of the CFPB by replacing the agency's single, independent director with a commission of political appointees.

The banks can't point to any difficulties with the agency's operations. In fact, the CFPB has been operating for only four years, but the success of the single-director structure is already apparent. Under the leadership of Director Richard Cordray, the CFPB already has:

• returned more than $11 billion to over 25 million consumers who were cheated on their credit cards, checking accounts or other financial products;
• built a complaint hotline that has exceeded all expectations, handling more than 700,000 complaints and building an information database that is beginning to level the playing field for consumers; and
• issued new, common sense rules on mortgages and other financial products and services that have helped consumers compare costs and understand risks -- all while making markets safer and more resilient.

Part of the reason the agency has succeeded is the current single-director structure makes it easier for Congress to hold someone accountable for the agency's core mission -- concentrating the mind in a way that does not occur with multi-person boards.

The single-director structure also allows the agency to be more nimble in responding to new and emerging threats to consumers, to move faster and more definitively. And the structure permits the head of the agency to stay focused on protecting consumers, rather than burning time managing partisan sniping and bickering among the political appointees on a commission.

The single-director structure has also allowed the agency to respond more efficiently to reasonable requests from the financial services industry. When, for example, community banks asked the agency for more flexibility to issue mortgages to their customers, the agency promptly agreed -- creating broader exemptions in its mortgage rules for smaller lenders and those in rural and underserved areas. Years of delay and partisan bickering among commissioners were easily avoided.

In short, the agency is working, which may be exactly why the big banks and their Republican friends are pushing so hard to tangle it up with a different administrative structure. The arguments they offer for their bill don't even pass the smell test.

The industry and its allies claim that the consumer agency was originally conceived of as a commission -- a point that is both irrelevant and wrong. It's irrelevant because what matters is whether the agency is working now -- not whether it's identical to some initial conception of it.

As Jeffrey Zients, the Director of the President's National Economic Council, wrote last month: "The CFPB has been an incredibly effective watchdog for the American people. If it ain't broke, don't fix it."

But the industry claim is also wrong.

When I first proposed the idea for a federal agency dedicated to protecting the consumers of financial products, I suggested that the agency might resemble the Consumer Product Safety Commission. In making that comparison, I focused on the mission and jurisdiction of the agency -- not its structure.

As the consumer agency went from a theory to a reality, I delved more deeply into the details of how the agency might work, and I took a close look at the successes -- and failures -- of other agencies. I consulted with experts. I read books. I talked with government workers. And it didn't take long before I strongly supported a single-director structure.

Nor was I alone in reaching that conclusion. The architects of the Dodd-Frank Act -- Senator Chris Dodd and Representative Barney Frank -- also personally supported a single-director structure from the start.

In the run up to the financial crisis, the Securities and Exchange Commission's inaction demonstrated the challenges facing a politicized commission. Even now, more than five years after Dodd-Frank was signed into law, the SEC still hasn't finalized more than 30 explicitly-required rules, thanks in part to partisan bickering among commissioners. And the SEC's track record is sparkling compared to some of the other federal commissions -- like the Federal Election Commission -- that barely function at all.

Let's face it: The quickest way to undermine an agency's effectiveness is to make it a commission -- which is why I want a single director and the banking industry doesn't.

The industry also claims that a single-director structure would leave the agency vulnerable in the case of poor leadership. I smile at the thought that the agency's vulnerability is suddenly keeping the industry's lobbyists up at night. But hypocrisy aside, I know some of my Democratic colleagues genuinely worry that the CFPB could go backwards under the leadership of a director appointed by a hostile Republican administration -- and they wonder if a commission might be a good way to hedge against that risk.

They are right to worry about the future of the agency under Republican control. Shoot, I worry too, but that doesn't mean it makes sense to forgo a single director. As Georgetown Law Professor Adam Levitin has argued, the legal checks on the CFPB make it difficult for a new director to move things backwards. There are serious legal protections that restrict an agency's ability to repeal, or even amend, existing rules.

Ultimately, a poor director might cause the agency to bring fewer enforcement actions, ease off its supervisory responsibilities, or take other steps to undermine the agency and its mission -- and that would be very bad. But those risks are balanced off by the opportunity to make real progress under the leadership of a good director who embraces the agency's mission. Progress in good times is better than the perpetual gridlock of a commission.

And that brings us to the last industry argument: a commission is needed to bring accountability to the CFPB. Industry lobbyists have said again, and again, and again for years that the CFPB director is some sort of tyrant, free to rule as he pleases without congressional oversight.
Again, they are just plain wrong. The consumer agency is one of the most accountable agencies in town.

By law, the agency must:

• submit annual financial reports to Congress;
• report to Congress twice a year to justify its budget from the previous year;
• send its director to testify before both houses of Congress twice a year;
• submit financial operating plans and forecasts and quarterly financial reports to the Office of Management and Budget;
• subject itself to an annual Government Accountability Office audit of its expenditures;
• operate under the oversight of the Office of Inspector General for the Federal Reserve

• subject all rules to careful cost benefit analyses;
• consider the impact of rules on smaller banks; and
• consult with federal regulators and consider any objections those regulators raise during that process.

And, of course, Congress can always overrule a CFPB rule that it doesn't like, and the agency's actions are subject to judicial review under the Administrative Procedure Act.

That's a list that will measure up against any regulatory agency in Washington. But the CFPB is held down by one additional constraint that sets it apart from other federal agencies: it's the only agency in Washington that is subject to a veto by other regulators.

That's right, the CFPB's rules can be rejected by the Financial Stability Oversight Council. So let's get the record straight here: There is a huge amount of accountability built into the CFPB structure.

The industry push to replace the single director with a commission is not about accountability -- and never was. It's about weakening the agency by making it slower, more political, and more partisan -- leaving the biggest banks more opportunities to boost their profits by cheating American families.

We saw this movie before, when the big banks raked in billions of dollars financing crazy mortgages, deceptive credit cards, and dozens of other tricky products -- and it ended with a crash that cost the economy as much as $14 trillion and a fat bailout for the very people who caused it. It's time to say no to the big banks and no to their lobbyists, their lawyers and their Republican friends in Congress.

The CFPB is starting to make a difference. It's working on the side of people -- not giant banks or shady payday lenders -- holding lawbreakers accountable and helping level the financial playing field. That kind of independence can't be tolerated in some circles. For years, both the industry and the Republicans have made clear -- directly and indirectly, in front of cameras and behind closed doors -- that they want a toothless consumer agency, an agency that waters down rules, settles with lawbreakers on the cheap, and doesn't interfere with industry profit-making even when it means robbing consumers.

Votes over the CFPB present the same choice today that they always have -- a choice between big banks and predatory lenders on one side and families on the other.

Me? I'm with the families.