CFPB's Unlawful Actions are Undermining Consumer Choice and Competition

How much power should one agency have over how American consumers borrow, save, and bank? It’s a question we have asked since the Consumer Financial Protection Bureau (CFPB) was first proposed.

It is imperative that consumers have confidence in the financial system and the services they utilize to save and borrow. One of the best ways to protect consumers is to ensure they can select services that best meet their needs from the wide number of options provided in a competitive market.

The CFPB is heading in a direction that is trying to radically reshape the American financial services sector. In a recent speech, CFPB Director Rohit Chopra stated his intention to outright ban certain products and restructure the industry. The current ideological agenda and unlawful actions will hurt consumers, businesses of all sizes, and the economy.

Recent rhetoric and changes in CFPB policies are creating uncertainty that will harm consumers by causing financial companies to limit the types of mortgages, car loans, and personal credit they offer consumers.

As the voice of American business, the U.S. Chamber of Commerce is challenging the agency’s lack of transparency and accountability, and the legal grounds for recent policy moves.

The CFPB is creating uncertainty and undermining the marketplace by removing power from the institutional career staff and consolidating it in the Director’s office. The Chamber is raising questions about the new “Policy Fellowship Program” which appears to create new roles, appointed by the Director, that are analogous to those held by senior political and career staff but that are not required to abide by the rules set in place to ensure a competitive and fair hiring process.

We also have raised objections to the CFPB’s revisions to its administrative adjudication process. The revised procedures for the CFPB’s in-house court strips defendants of procedural safeguards and makes it more difficult to appeal to federal courts. The revisions also permit the Director to serve as both prosecutor and judge. The CFPB cannot claim with a straight face that this is fair – and it’s no wonder the CFPB quietly made these changes without consulting the public.

Further actions by the CFPB have broken with long-standing policies across Republican and Democratic administrations. Most recently, the CFPB invited state attorneys general to enforce federal consumer financial laws, something never intended by Congress.

The CFPB is also deviating from its responsibilities to protect consumers in favor of a wholesale restructuring of the market. In late May, the CFPB announced the creation of the “Office of Competition and Innovation” tasked with identifying “market-structure problems that create obstacles to innovation.” This initiative seems more focused on market regulation than innovation.

The broad authority granted to the CFPB by Congress has been a topic of debate since its inception in 2011, but its primary purpose of enforcing federal consumer financial protection laws is not up for much debate. One authority that Congress explicitly did not vest in the CFPB is the authority to act as an antitrust regulator or to manage competition across the financial services sector. The Dodd-Frank Act mentions the CFPB should ensure markets are competitive, but this should not be conflated with the FTC and DOJ’s clear authority to enforce the Federal Trade Commission Act, the Clayton Act, and the Sherman Act.

In the last six months the CFPB has claimed, without supporting data, that a lack of market competition justifies a host of actions interfering in the financial services market. But, recent research published by the U.S. Chamber in partnership with NERA Economic Consulting shows there has been a reduction in market concentration in commercial banking, consumer lending, and credit card issuing firms in recent years. 

The CFPB needs to acknowledge this fact and provide flexibility to financial institutions to meet the needs of consumers.  Every day, across the United States, people benefit from banks, credit unions, and non-depository financial institutions working with them to turn the dream of home ownership into a reality, offer short-term lending products like credit cards to manage cashflow, and make everyday money management easy via mobile banking.

Overzealous regulation will not make the marketplace more competitive, instead it will disincentivize companies from innovating and meeting the disparate needs of millions of consumers.

The CFPB needs to stop acting outside its authority and focus on its expertise of consumer protection, not reshaping markets. The Chamber has consistently advocated for over ten years for the CFPB to be governed by a bipartisan commission and have its funding subject to oversight by Congress via the appropriations process.

To protect the choice of American consumers and the vibrancy of our economy, the CFPB needs to be held accountable.

Tom Quaadman is executive vice president of the U.S. Chamber’s Center for Capital Markets Competitiveness (CCMC).