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Consumer Financial Protection Bureau lacks oversight
Date: March 16, 2016
By: Rep. Marlin Stutzman
Years into our so called economic "recovery," economists are beginning to whisper about the next recession. One of the main culprits behind the economy's weakness has been the slow creep of overregulation into every aspect of industry and daily life. Good government can help keep consumers safe from fraud and other scams, but when it comes to financial services, Consumer Financial Protection Bureau (CFPB) overregulation hurts the market, and thereby consumers, horribly.
Let us first consider the current regulations themselves. Dodd-Frank was sold primarily as a way to protect consumers from the failure of banks considered "too big to fail," but these regulations actually only succeeded in driving up compliance costs for banks like Old National. The problem is especially acute for small and rural financial institutions. These regulations, many of which are enforced by the CFPB, require banks to standardize their products, even though small banks compete by tailoring custom products for their communities. The CFPB mandates compliance tests of arbitrary rules and restrictive lending standards that cost small banks disproportionate amounts of income that cannot go toward mortgage lending or business lending. Local banks and credit unions end up cutting the range of services they can provide to the community. The CFPB's burdens directly limit the ability of small local lenders to support new businesses, car buyers, and others looking to regrow our economy.
Unfortunately current regulations are not the only problem. This summer the Obama administration published a request for information about online lenders. Such requests are the first step toward regulation, as officials have confirmed in public statements. New technology that increases access to credit for consumers is a positive development, but regulators can't help themselves in the rush to write new rules regardless of the impact on innovation.
Congress can hardly start to address many of these problems because CFPB is not currently subject to meaningful oversight. They get their funding from the Federal Reserve rather than undergo the Congressional appropriations process like other agencies. The President cannot remove the CFPB director without "cause," and Dodd-Frank tells the judiciary branch to defer to the CFPB on issues of consumer financial law. To really see the problem with this horrendous lack of oversight look no further than the CFPB's $215.8 million office renovation project. This building is worth only $153 million, and the CFPB does not even own it. They fly in the face of good governance, ignoring requests made by me and my colleagues on the Financial Services Committee to produce documents about their operations and currently facing external investigations for systematic race and gender discrimination against their own employees.
The CFPB has been a burden on hardworking Hoosier families since it was first established under Dodd-Frank. We need to limit financial overregulation and allow lenders to help our communities grow. I have personally authored multiple bills, like H.R. 4684 (Bureau Guidance Transparency Act) and H.R. 5403 (Reforming CFPB Indirect Auto Financing Guidance Act), co-sponsored and voted for other bills, and signed on to Congressional letters calling for transparency and basic oversight at the CFPB. In the future I will continue to defend the lenders and borrowers who form the backbone of our economy from the overreach of the Washington bureaucracy.
This column originally ran in the Evansville Courier & Press.
Stutzman has represented Indiana’s 3rd Congressional District since 2010. He sits on the Budget and the Financial Services committees.