The week before last, I attended a hearing of the House Financial Services Committee in Washington. I was there with a group of public-interest advocates in a show of support for the work of the Consumer Financial Protection Bureau and its director, Richard Cordray, who endured harsh grilling from lawmakers on the panel.
Since the CFPB opened its doors, it has directed some of the nation's largest banks to stop charging cardholders for unwanted add-on products; protected military families against illegal foreclosures and deceptive student and payday-style loans; required mortgage lenders to examine borrowers' finances more closely up front (reducing the risk of another wave of reckless and unsustainable lending); set up a public and searchable complaint system; and delivered more than $11 billion in restitution and relief to roughly 25 million consumers cheated by financial companies large and small.
The great majority of Americans, across party lines, look at these accomplishments and see a government agency doing the job it was meant to do. To the financial industry and its lobbyists, however, that same record of effectiveness makes the CFPB a problem that needs fixing. One of the industry's favorite "fixes" is an idea promoted by Craig Nazzaro on BankThink, as well as by several lawmakers at the hearing I attended: transforming the consumer bureau from a director-led agency to a five-member commission.
Why are bankers, other lenders and their political allies so enamored of commissions? Because they often succumb to partisan gridlock and are only rarely able to summon the will to stand up to corporate power. The Securities and Exchange Commission, for example, has yet to do much of anything about the built-in corruption of the credit rating agencies, eight years after the rating agencies played such a conspicuous role in causing the financial crisis.
Of course, this is not how commission backers explain their thinking. Instead, they assert that commissions are more accountable, and in the CFPB's case they make absurd claims about the supposedly unchecked authority of Cordray, its director. In his BankThink piece, Nazzaro cited a $109 million dollar penalty imposed by the CFPB on PHH Mortgage over kickbacks that allegedly led consumers to pay inflated prices for mortgage insurance. Nazzaro argued that the CFPB stripped PHH of its due process rights. And yet, the company will soon argue its case before the U.S. Court of Appeals for the D.C. Circuit, exercising the very procedural rights that the CFPB somehow denied it.
At the House hearing with Cordray, we were taken aback by the vitriolic tone of the questions put to him by several committee members. House Financial Services Committee Chairman Jeb Hensarling called the CFPB director a "dictator." Cordray responded politely (when he was allowed to respond), pointing out that Congress had decided on a single director at the CFPB for a reason: When you're dealing with a commission, he said, it becomes hard to hold anyone accountable for the agency's decisions and actions.
One of the senior Republicans on the Financial Services Committee, Texas Congressman Randy Neugebauer, has introduced a bill to carry out the commission idea. He insists he has the best interests of consumers and the CFPB in mind. Rules approved by a commission, he argues, will be more likely to withstand legal challenge. But a quick look at the voting records of Neugebauer and his allies suggest that they may be trying to protect financial companies rather than consumers. It is significant to note that these are lawmakers who, by and large, did not want such an agency to exist in the first place. Twenty of the Neugebauer bill's cosponsors were members of Congress when the Dodd-Frank Act, which established the CFPB, came to a vote. Nineteen of them opposed it.
The CFPB is far from the only director-led watchdog agency. The Office of Comptroller of the Currency has been operating that way since 1863 without inspiring a campaign to turn it into a commission. What's so different about the CFPB? It's the first and only financial oversight agency with a mandate to put fairness, transparency and the safety of consumers and borrowers ahead of the power and profits of banks and financial companies. The lawmakers attacking the legitimacy of its governing structure have made it abundantly clear that what they really object to is the idea of a regulatory body successfully wielding its power on behalf of consumers and the public interest.
Beverly Brown Ruggia is a community reinvestment organizer and advocate at New Jersey Citizen Action.
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