The Consumer Financial Protection Bureau (CFPB or the
Bureau) hit its second birthday this week in grand style. Has it really been
just two years? I don’t believe I would be in minority in feeling CFPB has been
around much longer given all the Dodd-Frank rules it has cranked out and all
the press it has received over the controversial recess appointment of Rich
Cordray in January 2012. But, who’s counting, right?
Speaking of Rich Cordray, his recent formal Senate
confirmation was perhaps the biggest birthday present of all to the Bureau.
Majority Leader Harry Reid (D-NV) had to threaten the Senate with the “nuclear option” (a change of Senate rules to allow “majority” rule) over several
stalled Obama nominees to key administration positions. The Senate was
close to DEFCON 1 before a handful of Republicans told Harry to take his finger
off the button because they would allow votes on the nominees. Cordray was the
first nominee to get confirmed. House and Senate republicans have been pressing
for structural changes to CFPB pretty much after the ink was dry on the
Dodd-Frank Act. Senate Republicans were united in 2012 and 2013 that no CFPB
Director nominee would be confirmed unless the CFPB became a commission (like
the FTC or FCC) and received its appropriations from Congress and not the
Federal Reserve. Two federal courts even called into the question the “recess” appointment of Cordray as they ruled that President Obama’s recess appointments
to the National Labor Relations Board were unconstitutional. The Supreme Court
even agreed to hear the case in October. All this legal uncertainty is fairly
moot given the Senate’s confirmation (and the Supreme Court’s recent proclivity
to threading the needle on touchy constitutional issues).
But, enough about history. What does the future hold for the
Bureau? I don’t buy quite into the hype by some that the Bureau is coming out
swinging against banks now that Cordray has lost his “recess” tag. I expect the
Bureau will be sensitive and responsive to the concerns from Capitol Hill. It
will certainly be responsive to the Government Accountability Office (GAO) as
it begins to examine its data collection practices. As requested by Sen. Mike
Crapo (R-ID), ranking Republican on the Senate Banking Committee, GAO will
review identity, account and transaction data the Bureau collects during its
supervision of banks or through other direct request. The Bureau claims that
the transaction data is de-linked with any personally-identifiable information.
We’ll see what GAO comes up with (presumably in 2014).
The Bureau also released its updated regulatory agenda
through the end of the year. Expect to see a notice of proposed rule-making on
extending Reg E protections to general-reloadable prepaid cards in addition to
new proposed rules on debt collection and payday loans. I suspect CFPB will
continue to tinker with the Dodd-Frank mortgage rules to take effect in January
2014. It certainly doesn’t want to be tagged with tanking the housing market if
no one can get a loan. If you really want to peer into CFPB’s future, follow
its consumer complaint portal progress reports. CFPB has stated that the trends
it sees through the complaint portals will drive its enforcement and regulatory
agenda.
Industry and CFPB need to work together more than ever to
ensure balance is struck between consumer protection and a healthy financial
services industry. Consumers are hurt if the pendulum swings too hard one way.
Keep checking with this blog for progress reports.
