The Consumer Financial Protection Bureau is harming consumers, not protecting them, and its unelected, power-mad bureaucrats are accountable to no one.
The Consumer Financial Protection Bureau is harming consumers, not protecting them, and its unelected, power-mad bureaucrats are accountable to no one.
T he misnamed Consumer Financial Protection Bureau (CFPB) has for more than a decade intervened in credit and financial markets in ways that haven’t protected consumers from fraud — but have added costs to lenders, while making it more difficult for lower-income Americans to get access to loans and credit cards.
The agency was conceived in the aftermath of the 2008 financial crisis by a leftist college professor named Elizabeth Warren. She had risen to prominence as chairwoman of the Congressional Oversight Panel for the Troubled Asset Relief Program (TARP). She then became the first director of the CFPB, the agency she helped push through Congress.
Things have gotten worse under Biden’s current CFPB director, Rohit Chopra, a protégé of Warren (who is now, of course, a Democratic senator from Massachusetts). His private-sector experience seems to be limited to a few years as a consultant at McKinsey, and he has never run a bank or business — but now tells them how to operate.
A recent letter from a coalition of Senate Republicans summed up how the CFPB has become a “lawless and unaccountable agency” that is “pursuing a radical and highly-politicized agenda unbounded by statutory limits.”
Under the Biden administration, these regulators have “adopted an arrogant regulatory ethos: the CFPB can do whatever it wants.” The Senate investigation found that in too many cases its “uncontrolled and unwarranted actions will ultimately lead to costlier credit, or no credit at all, for millions of Americans.”
The senators are right about the agency’s tactics to harass and even put small banks and micro lenders out of business. The CFPB has restricted late fees on credit cards, which has made it more difficult for the poor to get a credit card. They have targeted “payday loan” stores that provide short-term credit to low-income Americans who may have a cash crunch and need access to short-term funding. The regulators accuse these stores of charging too high an interest rate, but if that is the case, why do customers often line up outside the stores to get these two- or four-week loans? Somehow the CFPB thinks that it’s better for these people to run up the debt on their credit cards or even resort to a loan shark than to go to stores or banks that offer them lifeline short-term loans.
Who gave these unelected regulators at the CFPB the authority to intervene in these markets in the first place? The senators are correct to complain about the arrogance and power grabs by “independent regulatory agencies,” such as the Federal Trade Commission or the Securities and Exchange Commission, which impose an estimated $2 trillion in costs each year on private businesses and households.
It is hard to think of any agency that has stretched and abused its regulatory tentacles as much as the CFPB. Moreover, it’s effectively accountable to no one in the government. It is the only regulatory agency that doesn’t even have to go to Congress for funding. It gets its funding from the Federal Reserve — which is yet another agency of government with little congressional oversight.
The good news here is that a lower court recently invalidated the CFPB funding mechanism because it insulates the agency from the congressional appropriations process. This case is now headed to the Supreme Court, and the justices’ ruling will have a major impact on defining the Constitution’s separation-of-powers doctrine.
Ideally, the justices will declare that we have three branches of government in America — not four. There is a real and practical problem with our democracy when an agency filled with unelected ideological officials can act as prosecutor, judge, and jury in its complaints against business.
Predictably, with no check on its powers, the CFPB has bullied companies throughout the U.S. financial system when led by appointees of President Biden and President Obama — and utilized questionable tactics along the way. Congress has had little if any recourse, since these unconstitutional agencies are beholden to the White House, not Congress, for their funding.
We now have a rogue agency that has arrogated to itself the unilateral power to do significant damage to private businesses and lenders. This is harmful to our economy and to the constitutional protections that have made America a nation of laws not whims.
That is why the Supreme Court should rule that the CFPB’s charter and funding is unconstitutional. Once that happens, Congress should defund this needless agency altogether.