One of the tentacles created by Dodd-Frank was sliced into this week. By tentacle, I mean the Consumer Financial Protection Bureau (CFPB).
A three judge panel in the District of Columbia’s Court of Appeals ruled that the CFPB’s leadership structure was unconstitutional. Right now, the CFPB is headed up by a single man, Richard Cordray.
The first line of the ruling says that, “This is a case about executive power and individual liberty.” While this is a win, don’t get too excited though. Read on.
In an article at Conservative review , Hans von Spakovsky notes that the court recognized most agencies had boards or commissioners who act as a check and balance on one another. The CFPB has no such oversight.
I’ve written about the CFPB once before when they were moving into the College Accreditation arena and looking at, “unlawful acts and practices in connection with accrediting for-profit colleges.” The lack of oversight and invasion of the privacy of every day Americans by the CFPB in that article was clear.
In Hans von Spakovsky write up, he summarizes the heart of the problems with the CFPB’s powers:
The CFPB is a creature of the Dodd-Frank Act of 2010, which may rank with Obamacare as one of the worst pieces of legislation ever passed by Congress (see here and here for analyses of these fatally flawed statutory schemes). It created a regulatory nightmare, giving the CFPB unprecedented power over the consumer financial market with almost no accountability to anyone. Instead of being reliant on appropriations by Congress, the CFPB has a budget fixed as a certain percentage of the Federal Reserve’s appropriations. This arrangement effectively makes it unaccountable to Congress and to the rest of the Executive Branch, including the president.
In a nutshell, the way CFPB’s funding is structured makes them unaccountable to Congress or anyone else for that matter.
von Spakovsky goes on to explain that the court found that the single-director structure “represents a gross departure from settled historical practice”. von Spakovsky summarized some of the points made, underscoring that the way the CPFB operates right now is akin to a dictatorship:
In fact, he has more “unilateral authority than any other officer in any of the three branches of the U.S. Government, other than the President.” He has “enormous power over American business, American consumers, and the overall U.S. economy…covering everything from home finance to student loans to credit cards to banking practices.” He “alone decides what rules to issue; how to enforce, when to enforce, and against whom to enforce the law; and what sanctions and penalties to impose on violators of the law.”
So what did the court actually do? They decide to allow CFPB to continue operating with a minor change — Cordray has to report to the President now. Dodd-Frank remains intact.
It is likely that Senator Elizabeth Warren is not very happy, since she had proposed the creation of the CFPB in 2008. The CFPB is a monstrous agency that oversees every aspect of every portion of financial services and products in our country.
Here’s von Spakovsky’s illustration of what’s wrong with the court’s solution:
In the current administration, this change will have no effect in limiting the arbitrary and capricious actions of Richard Cordray and the unreasonable and unjustified regulatory burden the CFPB is imposing on our financial markets. President Obama has exhibited exactly the same type of unilateral behavior in abusing his executive power (see, for example, here, here, and here). More generally, as a practical matter, it appears unlikely that any president would closely supervise a highly specialized agency such as the CFPB (let alone seriously consider dismissing its director), given the many high-level responsibilities and political considerations presidents face.
This limited solution leaves the CFPB and the Dodd-Frank law in place. Thus, the abusive agency and a burdensome law will continue to hobble our economy and hurt consumers. Very recently, for example, the CFPB has proposed economically irrational new rules (see here and here) that threaten to destroy the payday and “high cost installment” lending industry, which offers many low income consumers the only source of debt finance available to them.
In other words, they’ve just given the reins of a vastly overreaching and unaccountable department to the Executive branch, who has arguably been equally vastly overreaching and unaccountable .