The Consumer Financial Protection Bureau is just beginning its work, but that hasn’t stopped its critics from aiming their rhetorical fire at it.
The Nov. 2 oversight hearing by the House Financial Services Committee’s subcommittee on consumer credit and financial institutions gave Republicans another forum for criticizing the bureau for overreaching and being insufficiently accountable. The independent agency, which still lacks a permanent director, has been in operation for 100 days.
Subcommittee Chairman Shelley Moore Capito (R-W.Va.) said she fears that the bureau will limit the flexibility of credit unions and community banks to make decisions that benefit their members and customers by imposing a “one size fits all” solution, including requiring the use of “plain vanilla products.”
But Rep. Barney Frank (D-Mass.), who was the chief sponsor of the law that created the CFPB, said lawmakers specifically rejected a proposal by the Obama administration to require those plain vanilla products. Further, he said that the hearing was being held two days too late.
Frank, the top Democrat on the House Financial Services Committee, said it should have been held on Halloween because Republicans speak of “spooks, ghosts, goblins and other nonexistent creatures.”
Capito also expressed concern that there would be an overlap between the CFPB’s regulatory efforts and the consumer protection functions of the safety and soundness regulators, including the NCUA.
Raj Date, who is running the CFPB until a director is confirmed by the Senate, said there wouldn’t be a duplication of efforts because his agency writes the regulations and the other regulators enforces them for institutions with assets of less than $10 billion. He said that his agency only has direct supervision of 100 of the nation’s 13,000 financial institutions.
House Financial Services Committee Chairman Spencer Bachus (R-Ala.) said the existing structure of the bureau with a sole director results in there being no checks and balances and it could easily become a loose cannon.
Date told the panel that the agency’s emphasis so far has been streamlining the disclosure process on mortgages and student loans. He also said the CFPB has been vigilant in beefing up the regulation of companies that prey on members of the military and their families. “We want to make sure consumers know what they are getting into,” he said.
Both Capito and the subcommittee’s top Democrat, Rep. Carolyn Maloney (D-N.Y.), praised the CFPB's work protecting military families and promised to hold a hearing on it later this year.
But Maloney and several other of the panel’s Democrats noted that the CFPB can’t regulate payday lenders and other nonbank entities until the Senate has confirmed a permanent head of the agency.
The Senate Banking Committee has approved the nomination of Richard Cordray to run the CFPB, but Senate Republicans have vowed to oppose the confirmation of any director of the bureau until there are changes to its structure.
Several Republican subcommittee members pointed out that credit unions and community banks didn’t cause the financial crisis but still had to hire more employees to deal with compliance issues.
Date didn’t address that concern directly but said stronger rules will benefit everyone and even the playing field among providers of financial services.