House Republicans last week took the first steps to change the structure of the new consumer protection bureau in a way that Democrats say would weaken it.
The House Financial Services Committee's subcommittee on financial institutions and consumer credit on May 4 approved bills that would have the bureau run by a five-member board rather than a director; allow the bureau's decisions to be overturned by a majority vote of the Financial Stability Oversight Council rather than two-thirds; and delay the startup of the bureau until a director is in place.
The votes were along party lines, with the panel's Republicans supporting the bills and its Democrats opposing them. Democrats, who control the Senate, have promised to provide strong oversight of the new bureau but have not expressed support for changing its structure.
Under current law, the Bureau of Consumer Financial Protection will be an independent agency housed inside the Federal Reserve and run by a director appointed by the president and confirmed by the Senate. President Obama hasn't nominated a director but has named Harvard law professor Elizabeth Warren to be in charge of the agency's setup.
House Financial Services Committee Chairman Spencer Bachus (R-Ala.), the key sponsor of the measure that would mandate the bureau be run by a five-person board, said his proposed structure would avoid concentrating too much power in the hands of one person.
"Some partisans of the CFPB have decried this as a radical concept. That's unfounded and unfair. But what is actually radical is the current leadership structure of the CFPB. It is unlike any other found in the federal bureaucracy. The CFPB director serves for a fixed term and therefore is exempt from presidential control; exercises sole authority over the agency; and has the singular power to spend hundreds of millions of dollars," Bachus said.
CUNA didn't take a stand on the bill but said if it is adopted, one of the five board members should have credit union experience. NAFCU supported the bill. NAFCU Executive Vice President Dan Berger wrote the panel that the structure will ensure that the decisions are "thoroughly vetted and debated instead of promulgated at the whim of a single individual."
Rep. Sean Duffy (R-Wis.) is the main sponsor of the bill to change the requirements for overturning the bureau's decisions. During the committee discussion, he cited concerns raised by NAFCU about the impact of regulations on small financial institutions to serve their members and customers. He said that making it easier to overturn the agency's decisions will increase the likelihood that regulators will consider safety and soundness and consumer protection issues when enacting new rules.
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