Consumer Financial Protection Bureau Under Fire For Overstepping Legal Authority

Consumer Financial Protection Bureau Under Fire For Overstepping Legal Authority

The Consumer Financial Protection Bureau (CFPB) has faced allegations that it overstepped its authority on at least two occasions. The most recent accusations came this past week from Congressional authorities from the U.S. House Financial Services Committee (HFSC). These questions are in response to the CFPB’s continued movements to coordinate enforcement actions with state authorities and banks, which critics say prevents people accused of wrongdoing from exercising their rights to legal representation. Whether or not this coordination oversteps the agency’s legal authority will likely be decided by the U.S. Supreme Court in upcoming months.

What is the CFPB?

Created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has been in existence since July 2010. The stated mission of the bureau is to make markets for consumer financial products and services work for Americans. They do this by enforcing federal laws against unfair, deceptive or abusive practices; overseeing mortgages, credit cards and other lending; collecting data on savings interest rates and providing information to consumers about saving money. Although Congress initially did not include a director within the agency’s structure, it now requires one and stipulates that he or she can only be removed from office for cause. Congress also authorized appropriations for funding from the Federal Reserve Bank of New York up to $200 million per year.

In 2011, Democrats introduced legislation to allow any member of the President’s Cabinet to fire a director who had not yet served a full five-year term.

Do they have too much power?

Some experts think the CFPB may be overstepping its legal authority. The U.S. House Financial Services Committee (HFSC) recently questioned whether the agency may be overstepping its legal authority, responding to the CFPB’s continued movements to coordinate enforcement actions. Earlier this year, HFSC sent a letter asking the head of the bureau, Richard Cordray, for a list of enforcement actions that have been coordinated with other regulators and why they were needed. If you are going to go out and start making these coordinated enforcement agreements without coming back and checking with Congress as to whether or not you have statutory authority for it, said Randy Neugebauer (R-TX), chairman of HFSC’s oversight panel on economic activity in hearing on Tuesday.

How did this all begin?

The CFPB was created under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act to consolidate post-crisis consumer protection authority that had been fragmented among several regulatory agencies. As such, Congress entrusted the bureau with broad rulemaking, examination, and enforcement powers. In November 2016, for example, the CFPB issued a Request for Information on Home Mortgage Disclosure in conjunction with eight other federal regulatory agencies to make uniform home mortgage data available across all jurisdictions.

Which side will win out?

The CFPB is charged with protecting consumers from unscrupulous or illegal financial practices. They have enforced these laws by issuing lawsuits and creating regulations. The HFSC fears that the CFPB may be overstepping its legal authority in terms of the regulatory standards it has adopted and the court cases it has pursued, as well as certain regulations that it has either proposed or finalized.