Quick Reaction to the new CFPB reorganization bill
Preliminary analysis only
Should the Bureau of Consumer Financial Protection become a bipartisan commission? Of course it should. There are many reasons for this. Commissions are more stable, less partisan, and less controversial than the sole directorship of the CFPB. They also allow for broader experience in leadership, allowing not only enforcement perspectives, but also people with industry experience, technologists, economists, and consumer advocates to have representation at the highest levels. Given the broad scope of the CFPB’s jurisdiction, that broad experience would be valuable.
Senators Deb Fischer (R-NE), Ron Johnson (R-WI), John Barrasso (R-WY), and Jeff Flake (R-AZ) have introduced the Consumer Financial Protection Board Act of 2017 to in effect turn the CFPB into a commission. While there is a lot in it that is expected, there are also some potentially surprising additions and omissions. This analysis should not be considered an endorsement or critique of the bill. With the necessary disclosures out of the way here we go:
The bill converts the leadership of the CFPB from a sole Director to a five-member Board of Directors. Not more than three members of the Board can be members of any one political party, forcing at least a bi-partisan Board, though the Libertarians, Greens, or another party would also presumably be eligible. The president appoints a member of the Board to serve as the chair.
Requirements to be a Board member
Board members must be American citizens and have “developed strong competency and understanding of, and have experience working with, financial products and services. Important to note that this criterion could apply broadly, including technologists.
Length of terms
The Board members serve five-year terms and can only be removed for cause. The initial Board will have three members, including the Chair, and serve for 30 months. Board members will not be eligible for reappointment to a consecutive term after their term is over, except for the Board members who served the short terms initially. They can be reappointed for a full term following completion of their partial term. Anyone appointed to fill a vacancy only serves for the remaining length of the term. Board members can continue to serve for up to 1 year while the new Board member is being confirmed.
The CFPB remains a bureau within the Federal Reserve
The bill does not remove the CFPB from within the Federal Reserve, nor does it change its name to a Commission. This is good news if you have a bunch of CFPB swag you want to stay relevant.
The bill lets the CFPB keep its Federal Reserve funding source
The bill allows for a transfer of funds to the Bureau from the Federal Reserve, provided the CFPB’s Board approves it.
The CFPB must follow a 1-in-3-out rule with hiring
The bill provides that for every one employee appointed by the Board three must be separated from service with the Bureau. There are exceptions to the requirement, including hiring needed for national security, extraordinary emergencies, and critical missions.
What is not included?
As mentioned earlier, the bill does not seem to remove the CFPB from the Federal Reserve or subject it to appropriations. It also does not remove the CFPB’s power to prohibit “abusive” acts or practices.
We are in the early days of this Congress. It remains to be seen what the successor to the CHOICE Act in the House will look like. While the original CHOICE Act converted the CFPB into a Board, the new one may not. Republicans may want their own sole Director to aggressively undo the legacy of Director Cordray. It seems likely that House Republicans will also want the CFPB to be subject to appropriations and have its authority over “abusive” acts and practices curtailed if not eliminated. The Democrats are likely to object to any efforts to change the CFPB. As such, this bill is likely just the beginning of the discussion in this Congress. Whether it makes it to the end of the story remains to be seen.
Update 1: Unsurprisingly the bill is controversial. A group called Allied Progress has begun campaigning against the bill’s sponsors, alleging they seek to “cripple” the CFPB.