Reform CFPB to save it

Last month’s decision by the U.S. Court of Appeals for the D.C. Circuit surprised the National Labor Relations Board (NLRB) by ruling that three Board members were unconstitutionally recess appointed by President Barack Obama.
 
While the new Consumer Financial Protection Bureau (CFPB) and its Director Richard Cordray were not the subject of the opinion, the Court’s decision could well give rise to similar CFPB challenges because Cordray was appointed under the same circumstances as the invalidated NLRB members.
 
What happens next remains unclear. The NLRB simply shrugged its shoulders and the Obama administration is seemingly sluggish to appeal.  Furthermore, the administration is content to pretend that the decision has no impact whatsoever on the CFPB.

This posture is untenable. Regulatory confusion, caused by the President’s risky and now unsound recess appointments and extended by the administration’s state of denial, is bad for businesses who will be forced to waste time and money trying to comply with rules that could be invalidated, and bad for consumers whose choices could be affected by the uncertainty.
 
While the path to restoring order to the NLRB may be long, the path to placing the CFPB on firm, long-term footing is clear and eminently doable, without jeopardizing the independence of the CFPB.
 
For more than two years, the Chamber has advocated for structural reform to restore checks and balances to the Bureau, and recently, 43 Senators wrote to the president insisting upon three specific changes to establish some basic accountability for the Bureau. They have taken a strong stand because the confirmation of the single Director is virtually the only check on the CFPB that Congress has. No other Federal agency has the unique combination of a single irremovable director, self-funding, and no requirement to coordinate its rules with other regulators.
 
First, replace the single director with a bipartisan five-member commission, similar to the Securities and Exchange Commission, the Commodities and Futures Trading Commission, and the Consumer Product Safety Commission (on which the CFPB was modeled). The original House legislation that ultimately became Dodd-Frank, would have established a commission. And if you go back to President Obama’s blueprint for financial regulatory reform, you will also find a Board running his consumer protection agency — not a single director wielding unprecedented power.
 
Second, bring the CFPB into the normal Congressional budget approval process. Agencies that spend taxpayer money need to be accountable to Congress. Period. This principle appears to be uniquely controversial only when it pertains to the CFPB.
 
And third, ensure effective coordination with the alphabet soup of other federal “safety and soundness” regulators to make sure the CFPB’s rules and practices don’t conflict with the rules adopted by other regulators. Dodd-Frank purposely subordinated safety and soundness concerns, and that balance needs to be restored, or consumers could see their banking choices limited.
 
None of these changes will “gut” the CFPB or alter the Bureau’s underlying independence, responsibility or ability to protect consumers as critics have suggested; rather, they will stabilize the Bureau for the long term, preventing major policy swings as the political winds in Washington shift back and forth.
 
Now, as the president enters his second term with an appeals court decision that makes it even more obvious that a confirmation process is needed to establish the Bureau’s legitimacy and longevity, we hope Congress and the administration can come together to support reasonable reforms that can restore checks and balances to the Bureau.
 
Hirschmann is president and CEO of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness.
 

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