“It’s About ‘That’ Time” for the CFPB to Comment on Hunstein

Editor's note: This editorial is authored by John K. Rossman a Shareholder with Moss & Barnett.  Mr. Rossman is a leading financial services attorney and member of the iA Legal Advisory BoardConsumer Relations Consortium, and Innovation Council. This content—and all insideARM articles—are protected by copyright. All rights are reserved.

The recent decision by the Fifth Circuit Court of Appeals holding the funding structure of the Consumer Financial Protection Bureau (CFPB) as unconstitutional was hailed by many in the debt collection industry as a long-overdue check on the seemingly unlimited power of this federal agency. (See The CFPB and the Fifth Circuit Ruling: 3 Things You Need to Know).

The CFPB was created in the last decade by a team of experienced politicians and constitutional scholars, yet surprisingly the CFPB lacks the recognized foundations of an effective and accountable federal agency like the Federal Trade Commission (FTC). For instance, the FTC leadership is a board of five commissioners, each nominated by the President, confirmed by the Senate and eligible to serve for a seven-year term. In contrast, the CFPB has a single director with an unlimited term that is removable at the pleasure of the President.  Further, the FTC is funded through budgetary appropriations and is required to submit a detailed annual budget to Congress for approval, in additional to itemized reports on its spending. The CFPB is not funded through Congressional appropriations and thus submits neither a detailed budget nor itemized reports of its spending to Congress.  

This lack of Congressional oversight regarding the leadership and funding of the CFPB resulted in this agency taking unfounded regulatory actions that are presently under judicial scrutiny. For example, the CFPB’s recent revisions to the financial services examination manual to include disparate impact is being challenged because the CFPB’s concept of disparate impact has previously been rejected by both the Courts and Congress. (See U.S. Chamber of Commerce and Other Trade Groups File Lawsuit Against CFPB Challenging UDAAP Update to Exam Manual)

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