Legislation Would Reform Consumer Financial Protection Bureau

By Serena Lynn, Editor, the CCH Federal Banking Law Reporter and Bank Digest, April 8, 2011.

Legislation has been introduced in the Senate that would reform the structure of the Consumer Financial Protection Bureau. The Responsible Consumer Financial Protection Regulations Act of 2011—S. 737—would replace the single CFPB director with a Senate-confirmed, five-person commission similar to the leadership structure of the Securities and Exchange Commission, Commodity Futures Trade Commission and Federal Trade Commission. It would also subject the CFPB to a regular appropriations process similar to most federal agencies. Similar legislation was introduced in the House of Representatives on March 16, 2011.

Bipartisan-Led CFPB Commission Supported

Witnesses testifying before the House Subcommittee on Financial Institutions and Consumer Credit (webcast) have expressed support for legislation to change the leadership structure of the CFPB so it is governed by a bipartisan commission rather than a single director appointed by the President. “Having the CFPB led by a bipartisan commission received strong support from Republicans and Democrats in the last Congress because it makes sense. The CFPB will do a better job carrying out its mission if it is led by a bipartisan commission rather than a single director,” stated Financial Services Committee Chairman Spencer Bachus, R-Ala. The hearing reviewed several proposals that have been introduced to improve the structure of the CFPB.

Checks and Balances

In a separate statement, Financial Services Committee Member Rep. Carolyn Maloney, D-N.Y., has spoken out against the proposed legislation. She asserted that “There are plenty of checks and balances built into the structure of the CFPB as it is now. We should let it open its doors and then make judgments about what tweaks might be necessary.”

A Financial Services Committee press release refuted Maloney’s claim that the Federal Reserve Board, the Commodity Futures Trading Commission and the Office of the Comptroller of the Currency are examples of regulators that do not operate under a commission but rather a single director. The press release cited an article by Daniel Indiviglio, an associate editor at The Atlantic, who pointed out that other regulators also have a commission structure.