Adam Levitin is a well-respected academic, but in his recent op-ed, "What the CFPB 'Commission' Debate Is Really About," he is dead wrong. Levitin concludes that the financial services industry both wants a multimember commission to lead the Consumer Financial Protection Bureau as a way to neuter the agency, and is focusing on the leadership structure as a way to avoid challenging the agency directly. Neither could be further from the truth.
Levitin says the financial services industry "doesn't have the courage" to take on the CFPB, but America's local, member-owned credit unions have never backed down from confronting the CFPB when it has overreached. And a survey of the comment letters responding to the CFPB's recent rulemakings as well as the queue of pending and anticipated lawsuits against the bureau dispel any notion that the industry lacks courage to challenge the CFPB or its rules.
Levitin asserts that a multimember commission will not lead to more accountability, could still allow for arbitrary actions or abuse of power, and would not further policy stability as much as the Administrative Procedures Act already does. But there are large holes in his logic.
First, as presently structured, the CFPB is an anomaly in the federal government, with extraordinary and unprecedented authority vested in a single person, and lacking appropriate levels of congressional oversight. Indeed, the U.S. Court of Appeals for the D.C. Circuit, in its recent opinion PHH Corp. v. CFPB, recognized that CFPB Director Richard Cordray "enjoys more unilateral authority than any other officer in any of the three branches of the U.S. Government, other than the President." That is hardly a recipe for the transparency and accountability that Levitin claims already exist.
Second, so far the CFPB has not been a balanced or stable agency for the industry it regulates or for the consumers it aims to protect.
For example, the CFPB issued thousands of pages of TILA/RESPA regulatory changes for a simple congressional directive to combine two mortgage disclosure forms into one. Congress wanted to reduce borrower confusion and industry burden by harmonizing two sometimes conflicting regimes. But what should have been a simple task has resulted in a bureaucratic quagmire. With numerous rulemakings, including one to "fix" an assortment of issues on what was already a "fix," the CFPB has created confusion for borrowers and lenders alike, delayed legitimate closings, increased costs to Americans, and in some cases denied access to otherwise creditworthy borrowers.
Consider also the CFPB's proposed small-dollar lending rule, a veritable phonebook at over 1,300 pages. This proposed rule is intended to govern a simple loan transaction but will likely have the effect of eliminating many legitimate, favorably viewed, consumer-friendly lending programs. This is not, as Levitin calls it, "nitty-gritty" rulemaking, but is instead the CFPB making significant and ill-advised policy decisions without a congressional directive.
Finally, we agree with Levitin that the Administrative Procedures Act should provide some stability – if the CFPB followed the statute. In the PHH Corp. case, Cordray unilaterally, and without notice or comment, reversed years of longstanding policy interpretations by the Department of Housing and Urban Development and levied a massive fine on the company. The CFPB recently used its authority dealing with "unfair, deceptive, or abusive acts or practices" to set aside decades of National Credit Union Administration guidance to credit unions. Through these actions, Cordray has circumvented well-established administrative law and replaced it with a structure that requires regulated entities to read his mind and react to his disciplinary flights of fancy. Far from "nitty-gritty," this is creating policy without accountability to Congress, the executive branch or the American people.
The financial services industry is not afraid of standing up to the CFPB. But we are worried about an unrestrained regulatory hammer that advances a political agenda at the sacrifice of consumer access and choice. The CFPB's jurisdiction is wide, the industries that it regulates are numerous and the effects of its regulations are complex. No one person can ever master the nuances of everything.
Updating the CFPB to include a multimember commission would enhance consumer protection by ensuring that diverse perspectives are included in final rules, that the law itself is followed, and that disruptions and market uncertainty caused by personnel changes are prevented. Everyone would benefit from such a structure.
Ryan Donovan is chief advocacy officer for the Credit Union National Association.
