Unaccountable and out-of-control government will be one of President Obama’s most regrettable legacies. And the number one candidate for the model of unaccountable government? The Consumer Financial Protection Bureau (CFPB), which recently passed it’s fifth anniversary.
Texas Rep. Jeb Hensarling calls it “the single most unaccountable agency in the history of America.” That’s saying something, and yet it may be an understatement. That’s why Senator Ted Cruz and Rep. John Ratcliffe have introduced the Repeal CFPB Act to abolish the agency and send its regulatory functions back to the agencies that originally handled them.
Democrats created the CFPB as part of Dodd-Frank; no House Republicans voted for the legislation, and only three moderate Senate Republicans did.
And yet Congress can’t cut its funding, fire its people or challenge it in court—at least not easily. CFPB funding is controlled by the Federal Reserve Bank, yet another unaccountable organization. Maybe CFPB really stands for Congress’s Formula for Protecting Bureaucracies.
It’s not doing much to help government overspending either. The size of the agency and its budget have exploded since passage, and there is no end in sight. In its first year the CFPB budget was $123 million. By 2016 it could be as high as $632 million—a 500 percent increase in five years. And it’s using that taxpayer money to create mischief.
The CFPB is a regulatory monster, attacking anything that handles, loans or manages money. Credit unions, payday lenders, auto financing, medical debt, student debt. You name it and the CFPB is trying to over-regulate it.
Take credit unions. No one thinks that credit unions were responsible for the financial meltdown that began in 2008, and yet they have been hit with more than 6,000 pages of regulations since 2009, with most of those regulations coming from the CFPB. Big Wall Street players, by contrast, have mostly gotten off scot-free.
Another industry in the CFPB’s crosshairs: payday lenders. CFPB is working to essentially shut down these companies that make small, short-term loans usually to working families of various incomes.
Critics claim that payday lenders take advantage of their customers. But banks aren’t in the business of lending $100 or $200 for a week or two, until the next paycheck comes in. And if they did they would have to charge disproportionately higher fees to do so.
Without the payday lending industry, workers in need of immediate cash might have to pay exorbitant late charges or turn to unregulated loan sharks, or they might take a chance on writing a hot check in the hope of finding some money to cover it.
If the complaint is that payday lenders charge too much interest, have you seen what banks charge for a bounced check?
If there are bad actors in the payday lending industry, then go after them. But the industry provides a needed service to people who need small amounts of money immediately.
Or consider student debt. President Obama and the CFPB are increasingly concerned about the growing burden of student debt, and well they should be because it has exploded under the president.
The Washington Post points out that student debt is $1.2 trillion—more than triple what it was a decade ago. The reporter goes on to say, “It wasn’t always like this. Student loans were the smallest form of household debt until 2009, the Fed data shows.”
Yes, the recession played a role in increasing student debt, but we have had recessions in the past and student debt didn’t triple. The real problem started when Obama decided the federal government could do a better job of handling student loans than the private sector.
Once Obama took the guaranteed student loan business away from private sector banks and put the federal government in charge, students have piled up more student debt than ever.
Now the CFPB wants to bring its regulatory overreach that only exacerbates the current problems to credit unions, payday lending and other financial institutions.
That isn’t to say there’s no role for regulation, but the entity most in need of regulation right now is the Consumer Financial Protection Bureau. Members of Congress—and the presidential candidates—need to begin explaining how they will regain control over this out-of-control agency. In short, who will protect us from this agency created to protect us?