Part of the financial overhaul legislation that went into effect last year was the introduction of a new government agency, the Consumer Financial Protection Bureau. The CFPB is designed to act as a watchdog for the finance industry and financial institutions, acting in the best interest of American consumers.
While the CFPB will not officially begin its work until July of this year, framers appointed by President Obama, including former Harvard bankruptcy professor Elizabeth Warren, have been developing and planning the bureau for some time. But now, it seems, Republican lawmakers are making noise about the Bureau and are attempting to limit the CFPB’s powers of oversight. Here’s why.
What the CFPB Is Designed to Do
The CFPB was created in response to the economic fallout linked to the questionable lending practices that touched off the Great Recession. Its stated goals include:
- Regulate consumer financial products and services: Making sure lenders, banks and other parts of the financial industry adhere to laws and rules is one major responsibility of the CFPB.
- Report to various committees: Twice a year, the CFPB must make a report to committees concerned with financial services and products in the House and Senate.
- Track consumer complaints: The CFPB will offer a toll-free hotline for consumer complaints once it’s up and running later this year.
- Conduct research: In order to better serve the public, the CFPB will study what areas are proving problematic for American consumers and investigate possible solutions.
- Promote financial literacy: Generally speaking, the CFPB will undertake the task of improving knowledge and understanding of financial products and services among American consumers.
Why Some Lawmakers Want to Limit the CFPB’s Power
Most of the jobs identified for the CFPB sound pretty innocuous if not downright helpful to the average consumer and/or consumer advocate. But Republican lawmakers in the House have proposed the following changes to the organization:
- Replace the CFPB’s head with a board of directors. Supporters claim that this move would decrease the chance of politicization of the bureau, but opponents suggest that a board would be more likely to be swayed by outside influence. Further, a group of people may be unable to reach consensus to implement strong reform.
- Require the CFPB to follow the appropriations process. This reform is allegedly meant to make sure money isn’t spent wastefully.
- Give greater power to federal bank regulators. This move would, according to supporters, keep the CFBP’s rules from “causing” a bank failure.
The reason these proposed changes have caused uproar from the media is that the financial crisis we’re still dealing with demonstrated a clear need for the CFBP; these changes could seriously limit its power to enact any significant change. And as a kicker, some sources note that the lawmakers behind these proposals are largely responding to money spent by the financial industry to undermine the CFPB’s effectiveness.