Column: Revised GOP bill would destroy the Consumer Financial Protection Bureau
Give Rep. Jeb Hensarling this much credit: He’s persistent. And he’s not afraid to completely bend the truth in pursuit of weakening consumer safeguards.
Hensarling, chairman of the House Financial Services Committee, has made it his mission to roll back reforms put in place after the financial-services industry brought the global economy to the brink of collapse. High on his to-do list is crippling the Consumer Financial Protection Bureau to the point where it’s a consumer watchdog in name only.
The Texas Republican shared a memo with other lawmakers last week outlining changes he plans to make to his so-called Financial CHOICE Act, as in “Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs.” Impressively, he’s managed to make a bad bill even worse.
Even more impressively, Hensarling is portraying himself as a consumer champion, all evidence to the contrary notwithstanding.
“True consumer protection puts power in the hands of consumers, not Washington bureaucrats,” he wrote in a blog post. “True consumer protection promotes competition and choice and ensures that consumers have access to transparent and innovative markets that are vigorously policed for fraud and deception.”
Note how Hensarling is deftly having it both ways. On the one hand, consumers are protected by “competition and choice” in “transparent and innovative markets.” That is, consumers have nothing to worry about because companies will be bending over backward fighting for their business.
On the other hand, he admits that the marketplace needs to be “vigorously policed for fraud and deception,” which is, of course, precisely what the CFPB is charged with doing.
Plus, as you’ll see, Hensarling’s bill would prevent the bureau from doing just that — policing the market for fraud and deception.
So he’s saying strong regulation of companies is a necessity but at the same time wants less regulation of companies.
I don’t know how that works, but it sounds a lot like President Trump saying last week, in regards to U.S. policy on North Korea, that “going it alone means going with lots of other nations.”
Before we get to the meat-and-potatoes of Hensarling’s revamped legislation, let’s recall our last visit with the Financial Services Committee chairman. This was a couple of weeks ago when I reported that this paragon of consumer advocacy is in fact a lapdog of the financial-services industry.
Since he first ran for Congress in 2003, Hensarling, 59, has received $1.3 million in political donations from commercial banks, $1.4 million from securities and investment firms, $1.4 million from insurers, and $703,304 from finance and credit companies, according to the Center for Responsive Politics.
Of all House members who ran for reelection last year, he was the second-largest recipient of contributions from commercial banks ($274,900), topped only by Republican House Speaker Paul Ryan ($344,399).
In his first draft of the CHOICE Act, introduced last year, Hensarling proposed replacing the CFPB’s independent director with a more easily influenced bipartisan committee. His new version calls instead for a single director “removable at will” by the president.
Under current rules, the bureau’s director is appointed for a five-year term and can be ousted only “for cause,” which is defined as “inefficiency, neglect of duty or malfeasance in office.”
Hensarling’s bill also would allow for the CFPB deputy director to be “appointed and removed by the president.” At present, that job is filled by the director. Both these changes would ensure that the president has full control over the agency.
Gone would be the bureau’s authority to monitor the day-to-day activities of financial firms. CHOICE Act 2.0 stipulates that the CFPB would be an “enforcement agency only, without supervision functions.”
What that means is the bureau would be stripped of its current “supervisory” role, which allows it to audit firms’ practices and access internal documents. As an “enforcement agency only,” its authority would be limited to cracking down on corporate malfeasance only after it comes to light.
Kind of like a judge being demoted to a security guard.
Moreover, the bureau no longer would be able to go after corporate practices it deems unfair, deceptive or abusive, such as a payday lender with unusually onerous terms. Hensarling’s bill, incredibly, specifies that the CFPB would have no such authority “of any kind.”
And because the delicate feelings of companies are so easily bruised by criticism, Hensarling’s revised bill would completely do away with the bureau’s database of consumer complaints, which contains more than 700,000 searchable listings.
The first version of his bill throttled the effectiveness of the database by requiring that all complaints be “verified” before being posted online. The new version simply says no consumer complaints can be publicly aired. So there.
Clearly, none of these changes represent improvements, at least for consumers. Every one of them either weakens the CFPB politically or reduces its ability to effectively prevent financial firms from preying on customers.
In fact, Hensarling would give the bureau a whole new name: the Consumer Financial Opportunity Agency, which tellingly eliminates “protection” from the equation.
Sarah Rozier, a spokeswoman for the Financial Services Committee, said in a statement that Hensarling plans to reintroduce his amended bill by the end of the month.
“Our plan, which will be released in the next few weeks, is a bold and visionary plan that protects consumers by holding Wall Street and Washington accountable, ends bailouts and unleashes America’s economic potential,” she said.
I’m not sure how America’s economic potential has been shackled by a consumer agency that’s overseen a revamping of mortgage rules, proposed new regulations for payday lenders and held dozens of firms accountable for fiscal misdeeds. The bureau says it has recovered about $12 billion for consumers since 2011.
Marcus Stanley, policy director for the advocacy group Americans for Financial Reform, said Hensarling’s revised bill “makes regulators even weaker than they were before the financial crisis.”
“If this bill passes,” he told me, “it would turn the CFPB into an ineffective agency.”
Score that a big win for financial firms after years of filling Hensarling’s pockets with money.
You get what you pay for.