On the Fourth of July, Americans will celebrate our great nation’s freedom from a tyrannical government thousands of miles away.
But, more than 240 years since the adoption of the Declaration of Independence, we are not free from the tyranny of the federal government. There is one federal agency that is accountable to none, churning out countless regulations by fiat while escaping congressional—that is, the people’s—oversight. It’s called the Consumer Financial Protection Bureau (CFPB), a government watchdog founded in 2010 following the financial crisis.
{mosads}While most Americans have never even heard of the CFPB, the agency is no minor player. Since its inception, the CFPB has penalized a variety of individuals and companies to the tune of more than $5 billion. The agency is especially focused on targeting lenders—namely, the payday loan industry—with backbreaking mandates, making it harder for them to lend money to low-income borrowers.
Yet the agency operates almost entirely without oversight from the White House, Congress, and the judiciary branch. The CFPB receives its funding as a fixed percentage of the Federal Reserve’s annual budget, exempting the agency from the normal appropriations process. Meanwhile, CFPB Director Richard Cordray can only be fired by the president and for just cause—a nearly impossible task.
According to the U.S. Court of Appeals for the District of Columbia Circuit, the CFPB is “unconstitutionally structured” and a “gross departure from settled historical practice.” As U.S. Circuit Judge Brett Kavanaugh argues, the agency’s structure “poses a far greater risk of arbitrary decision making and abuse of power, and a far greater threat to individual liberty, than does a multi-member independent agency.”
More recently, the Department of Justice (DOJ) filed court papers asking a federal appeals court to order the restructuring of the CFPB. In the DOJ’s words: “There is a greater risk that an independent agency headed by a single person will engage in extreme departures from the president’s executive policy.” The House Financial Services Committee even held a hearing called “The Bureau of Consumer Financial Protection’s Unconstitutional Design,” bringing four witnesses to comment on the CFPB’s lack of oversight.
Even the Center for Responsible Lending (CRL)—a liberal advocacy group and one of the agency’s staunchest supporters—expressed concern about its dictatorial leadership structure. In CRL’s words: “It would be unrealistic to assume that sometimes the Agency’s director would not make some bad calls.”
Of course, this lack of oversight is compounded by the CFPB’s judicious rulemaking, which has carried billions of dollars in costs. Take payday loans: The CFPB now requires payday lenders—the issuers of short-term loans to low-income borrowers—to verify a borrower’s income, major financial obligations, and borrowing history before issuing any loan. The agency has issued a long list of “affordability criteria” to lengthen the payday lending process.
Current financial regulations governing short-term loans already guarantee that customers know the terms of their agreement, while the transaction itself remains quick and transparent. But CFPB mandates jeopardize the payday process by imposing unreasonably high standards, which ultimately hurts those Americans in desperate need of credit.
Fortunately, the Financial CHOICE Act recently passed the House and awaits a Senate vote. The bill would allow Congress to take on a greater oversight role by eliminating the agency’s independent funding from the Federal Reserve and setting the CFPB’s annual budget itself. Elected officials would also gain the ability to review any major financial rules proposed by the CFPB, allowing Congress to nullify any regulations deemed too burdensome for employers and consumers.
Reining in a rogue agency is imperative for Congress and our democracy. As millions of Americans celebrate our national freedom, they do so as subjects of an unelected bureaucracy in Washington, D.C.
Jeffrey Joseph is a business professor at the George Washington University School of Business.
The views expressed by this author are their own and are not the views of The Hill.