Sunday, July 24, 2011

Floor Amendments to Legislation Restructuring CFPB Would Improve Transparency, Prevent Conflicts of Interest and Address Language Barriers

A series of bi-partisan Floor amendments to House legislation (HR 1315) restructuring the Consumer Financial Protection Bureau would improve transparency, prevent conflicts of interest and nationally elevate language barrier concerns. The legislation would designate one of the five Commissioners to oversee the Bureau's activities pertaining to protecting consumers who are older, minorities, youth, or veterans, from unfair, deceptive, and abusive lending practices. The designated Commissioner must ensure that the Bureau conducts regular outreach to consumers regarding industry lending activities and must report to the full Commission, on a regular basis the impact of new loan and credit products and services on consumers. The designated Commissioner must also ensure that the Bureau coordinates with State-level consumer protection agencies on enforcement measures that protect consumers from unfair, deceptive, and abusive lending practices.

Pursuant to a floor amendment offered by Rep. Judy Chu (D-CA), the designated Commissioner must report to the full Commission about ways to protect consumers from unfair, deceptive, or abusive lending acts or practices, including how language barriers contribute to lack of understanding in lending activities. The Chu Amendment would require research on how language barriers can lead to unfair and abusive lending practices, and a report to the full Commission on ways to protect consumers from potentially unfair and deceptive practices. According to Rep. Chu, the designated Commissioner would be someone on a national level looking out for people who are being duped because of language barriers. Cong. Record, July 21, 2011p. H5338.

Relevant to the Chu Amendment, Rep. Shelley Moore Capito (R-WV), and floor manager of HR 1315, noted that the CFPB is already planning for multilingual outreach and understanding. During a conference call with a large number of bipartisan congressional staff, the senior officials at the CFPB indicated that the Bureau would have the capacity to translate into 180 languages. That is a very broad reach, said Rep. Capito, who added that there are other foreign language disclosures outreach by the Secretary of the Treasury to help persons facing language barriers and other aspects around the same issue that the Chu Amendment addresses.

Pursuant to a floor amendment offered by Rep. Peter DeFazio (D-OR), no member of the Council may vote on the decision to issue a stay of, or set aside, any Bureau regulation if the member has, within the previous two-year period, been employed by any company or other entity that is subject to that regulation. According to Rep. DeFazio, this amendment addresses revolving door issues to prevent potential conflicts of interest. The Council Member would have to sit out the vote but can still serve on the Council. Thus, if a proposed Bureau regulation directly affects their previous employer and they have been on the Council less than 2 years, they would have to sit out that particular vote. They can serve and vote on any and every other procedure, but just not on that particular thing. It's a very restrictive conflict of interest rule, said Rep. DeFazio. Cong. Record, July 21, H5334.

Under an amendment offered by Rep. Erik Paulsen (R-MN), the five non-voting Members of the Financial Stability Oversight Council, including a State insurance regulator and a State banking regulator would have the authority to challenge any regulations that are put forth by the Consumer Financial Protection Bureau. For example, while it is clear that the CFPB does not have the authority to regulate insurance, it could put forth a regulation that actually negatively impacts the industry and the economy, noted Rep. Paulsen, so it makes sense that all the Members on the Council have the ability to consider the impact that these new rules may have. The intent of the Paulsen Amendment is to improve the oversight on the CFPB by clarifying that any Member of the Financial Stability Oversight Council, including non-voting Members, may question any regulation and bring that up for clarification. Cong. Record, July 21, 2011, H5334

The legislation requires that when the Financial Stability Oversight Council meets to deliberate on a CFPB regulation, those meetings would be open to the public. The Quigley Amendment takes that one step further and would require that the meeting be live-streamed over the Internet. According to Rep. Mike Quigley (D-IL), the transparency goal of the legislation requires that the entire American public have access to these meetings over the Internet, not just people in one city. This is important to both supporters and critics of the CFPB, he noted. If a CFPB ruling is challenged by the FSOC, the subsequent proceedings should be more open, transparent, and accessible. Transparency will help ensure that all parties, banks and consumers, get a fair hearing.

Pursuant to an amendment offered by Rep. James Lankford (R-OK), a mechanism for Bureau transparency would require the Inspectors General of the Board of Governors of the Federal Reserve and the Consumer Financial Protection Bureau to post online and submit an annual report to Congress each February 1 illuminating four key elements in the bureau's operations during the previous fiscal year: 1) a list of all new guidelines and regulations prescribed by the Bureau within the previous fiscal year with corresponding descriptions of each; 2) a detailed list of all authority that the Federal Reserve Inspector General deems in conflict with other Federal departments and agencies, which is designed to highlight redundant functions within other federal agencies in order to improve efficiency within the entire U.S. financial regulatory structure.; 3) administrative expenses of the Bureau, including the amount spent on salaries, office supplies, and office space; and 4) the current balance at the Consumer Financial Protection Bureau, their fund itself.

An amendment offered by Rep. Scott Rigell (R-VA) would require the Consumer Financial Protection Bureau to submit a financial impact analysis to the FSOC, and also make the analysis publicly available, on each proposed rule or regulation that it intends to adopt. It would expand the cost analysis to include financial institutions of all sizes, not just the smaller ones that are currently under the cost analysis portion. Most importantly, the Rigell Amendment would require the Bureau to submit an analysis to the Council on how the proposed regulation would impair the ability of individuals and small businesses to access credit. According to Rep. Rigell, the amendment offers a reasonable solution that just would require the Bureau to pause and to calculate and to distribute to the public a clear indication of the impact that the regulation would have both on the lending institution and on credit for small business owners and individuals. Cong. Record, July 21, 2011, H5338.