It’s Time to Scrap Rogue Obama-Era Agency
When it comes to big government and federal overreach, nothing stinks quite like Sen. Elizabeth Warren’s pet project: the Consumer Financial Protection Bureau. The CFPB is a monster of constitutional violations, and the U.S. Supreme Court has finally taken notice.
The Competitive Enterprise Institute explains:
The CFPB was meant to protect American pocketbooks and property. However, its founders—the drafters of the Dodd-Frank Act of 2010—felt that in order to do so, it had to be protected from political interference. That resulted in the agency being insulated from accountability to the president, Congress, and the courts. Dodd-Frank gave the CFPB three mechanisms for avoiding accountability:
-Its funding comes not from congressional appropriations but from the Federal Reserve, which is to supply whatever the director requests up to a certain amount;
-It is headed by a single director appointed for a fixed term of five years who may not be fired by the president except for “cause,” such as dereliction of duty or malfeasance; and
-The courts are required to give extra deference to the CFPB’s decisions in some cases.
These provisions violate constitutional norms of checks and balances on executive power and have led the CFPB to abuse its power, including by trying to regulate in areas where its statutory authority is expressly limited.
For example, the CFPB attempted to regulate auto lenders, which are exempt from CFPB oversight under Dodd-Frank. The CFPB alleged that an indirect auto lender’s markup and compensation policies may be sufficient to trigger liability under the Equal Credit Opportunity Act (ECOA) if the lender’s credit decisions result in discriminatory outcomes. The CFPB then issued guidance on how auto finance firms can avoid being found in breach of the ECOA, indirectly regulating auto dealers by prescribing what kind of financing they may offer. An independent study of the CFPB’s methodology concluded that it severely overestimated the number of minority consumers supposedly harmed by the practice. This led to white consumers getting refund checks for supposed racial discrimination against them as African-Americans. Cordray admitted that the CFPB’s methodology contained mistakes. An agency subject to adequate constitutional oversight would probably not have been tempted to make these mistakes.
The CFPB has also failed in its core mission of protecting all consumers. For example, while it celebrated the fines it levied on Wells Fargo over its “upselling” scandal—in which bank staffers misled customers into opening new accounts for new services, and in some cases fraudulently opened accounts in their names without their knowledge—it failed to notice the bank’s abusive practices until it was alerted to them by The Los Angeles Times and California regulators, despite the bank being under Bureau supervision at the time.
Consumers have actually been harmed by CFPB rules. This is because it was set up with a one-size-fits-all mentality at its core. It was empowered to create rules that would apply to financial products in every case, based on the false premise that a government agency can design the appropriate financial products for a large and diverse society. This has denied many consumers access to useful, money-saving products. Consumer protection is ill-served if consumers are “protected” from getting access to products that suit their individual circumstances, or are forced to pay more for a less desirable financial product.
The CFPB is an all-around failure. It’s currently being propped up as a successful agency by one of the Democratic presidential candidates: Elizabeth Warren. It’s time to shut the CFPB, and Elizabeth Warren, down for good.