A good political campaign is very effective at orchestrating the perfect event. This might include a press briefing the day before, a leak of the principal's prepared remarks, handpicking speakers for a minute-by-minute staged town hall, coordinating with activists and politicians in Washington, and a midnight embargo to the press to maximize command and control of the message. Despite what many of you might be thinking, I am not referring to any national politician's election bid, but rather the frequent behavior of the independent financial regulator, the Consumer Financial Protection Bureau.
Despite repeated requests from industry that the agency operate more openly, fairly and impartially, the CFPB continues to ignore basic good governance principles when it comes to issuing rules. The CFPB — created with the mission "to make markets for consumer financial products and services work for Americans" — has rulemaking, supervisory and enforcement authority over the $3 trillion consumer financial services industry. In short, the bureau has authority over more entities than all other federal bank supervisors combined, totaling 15,000 institutions altogether. With its fifth anniversary in sight, this year we urge the bureau finally to put an end to its use of the midnight embargo.
This is how a midnight embargo works: The agency shares the proposal or the rule with the media the day before it is to be released, with a restriction — or embargo — on its public availability until midnight. The following day, everyone else is treated to the news stories with only the agency's views, since nobody else had a chance to look at the release. The result: total control of the message.
Over the last five years, the CFPB has focused on protecting consumers and reducing discriminatory and predatory lending. However, every time the bureau issues a major rule in the middle of the night, it undermines these efforts. Robust debate with multiple viewpoints is the best way to inform and strengthen consumer choice. Openness in the deliberation process will lead to a clearer understanding of what is expected of industry for consumers.
In a May blog, longtime New York Times journalist David Leonhardt said while the embargo can be "useful" to allow reporters to review complex material before it is released, "the practice is overused because it gives organizations a chance to control the information about them … all in the service of making themselves look good." Unfortunately, this is exactly what the CFPB is doing, and it is inappropriate for a governmental entity.
According to several financial services reporters, no other independent financial regulator operates the way the CFPB does. The Federal Reserve, the Securities and Exchange Commission and the Commodity Futures Trading Commission, to name a few, all hold open meetings when debating rules and regulations. These meetings are held in the daylight and often broadcast live on the internet, allowing people all over the world to hear both sides of the issue. The CFPB should be modeling itself after these regulators rather than a political campaign.
Consumers do not benefit when debate is shut down and news stories are scripted. In today's warp-speed, on-demand world, consumers want things whenever, wherever and however is most convenient to them. Consequently, the pressure is even greater on regulators and industry to make sure we are getting these rules and regulations right. If we don't, consumers are the ones who stand to lose the most.
In addition to rule-writing authority over all financial institutions, the CFPB has supervisory authority over every depository institution with assets over $10 billion. They also supervise all those in the business of origination, brokerage or servicing of consumer loans secured by real estate, and related mortgage loan modification or foreclosure relief services; private education loans; and short-term liquidity products. Authority of this magnitude is just too important and vast to be operating in the dead of night. If the CFPB is to deliver fair and effective oversight on behalf of taxpayers in the years to come, it must be more transparent, fair and impartial when issuing rules.
Those serving the public are entrusted with enormous responsibility. Here, we have an agency run by a sole director that is using back-door press tactics to manipulate the public story. This is a principal reason the CFPB needs balance within its leadership structure — a commission in place of a sole director. A commission would ensure the agency, which is tasked with protecting consumers, operates in the sunlight. The CFPB's media tactics often lead to confusion and unfair reporting, rather than advancing consumer interests. It is time the CFPB put an end to using the midnight embargo.
Jeannie Bunton is the executive vice president for communications and marketing and chief of staff for the Consumer Bankers Association. She is a former journalist.