The Consumer Financial Protection Bureau has a lot in common with the "Saturday Night Live" writers room, a new paper from the Bipartisan Policy Center would suggest.
When the federal agency works collaboratively and pays attention to critical feedback, its policies and procedures are frequently successful, the paper says. But when it shuts out informed opinions, the final product tends to bomb.
The 59-page white paper aims to provide a broad analysis of the CFPB's performance in the three years since the Dodd-Frank Act created it. While the authors banking lawyer Rick Fischer and civil rights advocate Eric Rodriguez applaud the bureau for the strides it has made so far, they identify some major shortcomings.
The CFPB needs to be more proactive in seeking input from stakeholders in the financial and consumer advocacy industries, the authors write. "When the CFPB puts out guidance on their own it tends to be quite problematic," Fischer says. He cites widespread confusion over guidance on how credit card companies are allowed to market add-on products as a prime example. "I got a lot of calls from regulated entities when the guidance came out saying, 'What does this mean?" Fischer says. "The bad news was, I couldn't tell them."
The CFPB also stands to improve by coordinating its bank examinations with those of other regulatory agencies, according to the paper. Whereas other regulators typically look at a broad range of banks' business activities, the CFPB takes a more narrow focus, examining individual types of products. The different approaches have significantly complicated bank supervision, the paper says.
"In order to make this process work in coordination with the other federal regulators, the bureau is going to have to make significant improvements in its communication of where it stands in the process," Fischer and Rodriguez write. Promptly closing out product-based exams could go a long way toward resolving the confusion, they say.
On the upside, the paper gives the CFPB high marks for revising a rule that inadvertently barred some stay-at-home parents and military spouses from opening credit cards. The bureau wins further praise for producing two new rules. The first requires lenders to verify that consumers have the ability to repay their mortgages; the second ensures that people sending money overseas are informed about transfer fees and exchange rates.
"The results are really good," Fischer says, because the bureau took steps to be transparent and inclusive throughout the rulemaking process.
While the CFPB has drawn fire in recent weeks for failing to answer lawmakers' questions about its data-gathering activities and for issuing overly complicated regulations, this paper draws an even-handed conclusion about the young agency.
"Our goal was to bring the heat down," Fischer says. "This bureau is going to be here for a long time, so it's in everybody's interest for it to work well."
Fischer is a bank regulatory lawyer at Morrison & Foerster and Rodriguez heads the office of research, advocacy and legislation at the National Council of La Raza, a Hispanic civil rights organization.