Bachus Legislation Would Change CFPB Lead

By Sarah Borchersen-Keto, CCH Washington News Bureau, and Serena Lynn, Editor, the CCH Federal Banking Law Reporter and Bank Digest, March 16, 2011.

House Financial Services Committee Chairman Spencer Bachus, R-Ala., has introduced legislation that would replace the Consumer Financial Protection Bureau director with a bipartisan commission of five members modeled after the Securities and Exchange Commission and Federal Trade Commission. According to Bachus, the Responsible Consumer Financial Protection Regulations Act is needed because the Dodd-Frank Act currently puts too much power in the hands of one person. Under Dodd-Frank, the CFPB director is given a broad and virtually unlimited mandate to substitute his or her judgment for that of consumers and the free market, in Bachus’s view. “Empanelling a five-member commission is an important first step in ending predatory financial practices without inappropriately limiting access to credit that small businesses and individuals want and need,” he stated.

White House and Treasury Special Advisor Elizabeth Warren defended the accountability of the new bureau against the claims that it is the most powerful federal agency that has ever been created. At a March 16, 2011, hearing of the House Subcommittee on Financial Institutions and Consumer Credit, Warren noted that the CFPB is “the only agency in all of government whose rules can be overruled, obliterated, wiped out, negated by other agencies.”

Warren also noted that unlike other banking regulators the CFPB will not be able to set its own budget, as its primary source of funding is capped by statute. In these two critical respects, she stressed, the agency is not the strongest but rather “the most constrained and the most accountable agency in government.”

Bachus told Warren that the bureau’s power combined with “very little accountability” would result in “a good faith reliance on your abilities and integrity and judgment. And that is quite a burden for you and quite a burden for us.”