SummaryWould allow Federal Reserve members and other banking regulators to overturn rules of the Consumer Financial Protection Bureau. Would undermine the independence of the agency and its ability to protect consumers from predatory commercial banking practices.
Details & Argument
This legislation would weaken the powers and autonomy of the Consumer Financial Protection Bureau, the agency created by the comprehensive financial reform law Congress passed in 2010.
The bill would allow a simple majority of the members of the Financial Stability Oversight Council to overrule the consumer protection bureau's proposed regulations. The oversight council is comprised of the Federal Reserve Board of Governors and representatives of financial regulatory agencies. These officials have historically protected the interests of the banks, while slighting the interests of consumers. Under the financial reform law, a two-thirds vote of the oversight council is required to overturn rulings by the consumer protection bureau.
The bill also states that the oversight council is required to set aside any consumer protection bureau ruling that it deems would compromise the safety and soundness of banking institutions. Also, a 45-day time limit on the ability of the oversight council to challenge consumer protection bureau regulations is eliminated.
The bill was passed by the House, 241-173, with 231 Republicans and 10 Democrats voting in favor and one Republican and 172 Democrats voting in opposition. Seven Republicans and 11 Democrats did not vote.
The Middle-Class Position
The middle-class position is to oppose this bill. The banking lobby has opposed the Consumer Financial Protection Bureau from its conception. This bill is one of several efforts to weaken the one government agency with the primary responsibility of safeguarding the interests of consumers in the financial marketplace, by making the directors rulings subject to agency directors whose job it is to serve the interests of financial institutions, not consumers.
The motivation of the bill sponsors, and organizations like the U.S. Chamber of Commerce and the American Bankers Association, is clear: The big banks fear the Consumer Financial Protection Agency because when it is effective bankers will not be able to get away with schemes that bilk consumers out of their hard-earned money. Within the first few months of the agency's operation, it forced Capital One to pay $140 million in refunds to credit card customers who were deceived into signing up for payment protection or credit monitoring services they did not want or need. It issued rules that require mortgage companies to make their disclosures more clear. It began policing payday lenders that have in the past charged usurious rates for small loans. And the agency has become a place where consumers can complain about illegal, unfair or deceptive behavior and be taken seriously.
The agencies that would be allowed a veto over the consumer agency's rulings have historically drawn their leadership from the very banking institutions they regulate, and are often captive to the interests of those institutions. That is precisely why there was a need to create a new agency whose sole constituency is the consumer of banking products, not the bankers themselves.
Of course, regulations should be written and enforced with the soundness of the regulated financial institutions in mind. But we have seen what happens when the concerns of consumers are trampled because financial institutions are not held accountable. Ultimately, an economy put into free fall because of unscrupulous behavior on Wall Street hurts not just working people taking out a mortgage or applying for a credit card; the entire economy – including the financial sector itself – is put at risk. Working people need a cop on the financial beat whose actions are not going to be compromised by the security guards of those being policed.