House Passes Legislation Changing Structure and Funding of CFPB

The House of Representatives passed legislation completely changing the structure and funding of the Consumer Financial Protection Bureau, even renaming it the Financial Product Safety Commission .The Consumer Financial Freedom and Washington Accountability Act, H.R. 3193, passed by a bipartisan vote of 232 to 182, with ten Democrats voting for the bill. The legislation was authored by Rep. Sean Duffy (R-WI).

The legislation would replace the single CFPB Director with an accountable, five-member Commission, one of whom must be the Fed Vice Chair for Regulation. The Commissioners, who must have strong consumer protection experience, would be  appointed by the President and confirmed by the Senate to ensure that a diversity of viewpoints inform the CFPB’s regulatory and enforcement agenda, and to conform the CFPB’s governance to that of other federal agencies such as the SEC charged with consumer or investor protection. H.R. 3193 would also subject the CFPB to the regular appropriations process and make it a stand-alone independent agency rather than a bureau within the Federal Reserve System.

The measure would prohibit the CFPB from using a consumer’s private, personal financial information without the consumer’s knowledge and consent. According to Rep. Duffy, the CFPB is currently engaged in a massive, multi-million dollar data collection effort of consumers’ financial information.

Finally, the legislation would prevent the CFPB from undermining the safety and soundness of U.S. financial institutions through regulatory overreach by changing its relationship with the Financial Stability Oversight Council (FS

Currently, under section 1023 of the Dodd-Frank Act, CFPB regulations may not be set aside unless two-thirds of the FSOC's voting membership votes to do so and the FSOC determines that the regulation puts the safety and soundness of the United States banking system or the stability of the financial system at risk. According to House Report No. 113-346 accompanying H.R. 3193, the current supermajority threshold and the requirement that the regulation have a pervasive negative effect on the entire banking system are too stringent, especially when the regulations in question have been crafted by a federal agency that lacks checks and balances in numerous other respects, and when one of the members voting on whether to set aside a CFPB regulation is the CFPB Director himself.

Thus, the legislation would change the vote required to set aside a CFPB regulation from two-thirds of the FSOC voting membership to a simple majority, excluding the Director of the CFPB. It would also modify the standard for the FSOC's review to permit a CFPB regulation be set aside if it is inconsistent with the safe and sound operations of U.S. financial institutions.