Congress Must Build a Better CFPB

Three years ago, Congress passed the Dodd-Frank Act, creating the Consumer Financial Protection Bureau, one of the nation's most powerful agencies. The CFPB has the ability to affect banks, credit unions, innumerable financial services companies — large and small — and more than 300 million American consumers.

Congress bestowed the CFPB with virtually unchecked power to examine financial institutions, collect data, make rules and enforce them. It also placed the bureau's leadership in the hands of one individual. As a result, the CFPB is largely unaccountable to Congress, and is isolated from the types of internal and external checks that are so fundamental to our form of democratic government.

If the CFPB is to be a strong and effective regulator for the long haul, Congress should restructure the bureau's leadership from a sole director to a bipartisan commission, the norm for    federal financial regulatory agencies for the past 150 years.

A commission structure provides for a balanced and deliberate approach to supervision, regulation and enforcement and offers stability for consumers and the industry. Indeed, the last major federal financial services regulator without a commission is the Office of the Comptroller of the Currency, an agency created during the Civil War.

Opponents of a commission may draw attention to the so-called veto power of the Financial Stability Oversight Council. This is ill advised. FSOC can overturn a CFPB rule only in extreme cases, but its effectiveness is unproven and it is unlikely to provide a meaningful check on the bureau. Seven of the ten FSOC voting members, a group which includes the CFPB, would have to veto the measure, but only after their own agencies have independently concluded the rule would pose a risk to the entire U.S. banking or financial system.

Moreover, at least three FSOC voting members — the Securities and Exchange Commission chairman, the Commodity Futures Trading Commission chairman and the independent insurance expert appointed by the president — have little experience regulating retail banking products and services. Additionally, everyday actions of the CFPB — examinations, guidance and reports, enforcement actions, data collection or complaints — lie outside the scope of this so-called veto.

The CFPB is not subject to the Congressional appropriations process, and it is an independent agency with a director appointed to a fixed term, removable only for cause. Additionally, the CFPB's deputy director, a person legally entitled to serve as the head of the CFPB in the absence or unavailability of the director, requires no Senate confirmation.

The CFPB's structure should be changed from a directorship to a bipartisan commission or board. Concentrating the CFPB's authority in the hands of one person threatens the very foundation of the agency as an objective, neutral regulator. A commission would serve as a source of balance and stability by encouraging internal deliberation and constraining the CFPB's ability to make politically motivated or ill-informed decisions.

The country deserves a regulatory body that is credible with the consumers it serves and the industry it oversees. Recent headlines warn of the consequences when very powerful agencies of our government overreach. A balanced approach to supervision and certainty for consumers should be the goal, and Congress has the power to make it so.

Richard Hunt is president and CEO of the Consumer Bankers Association.