The problem with zombies is that, even though they are dead, they’re still dangerous.
Currently, the Consumer Financial Protection Bureau (CFPB) is a zombie federal agency — deprived of funding and personnel, yet still legally in existence and still functioning. Congress should put a stake through its heart at the earliest opportunity, but until then, the CFPB continues to pose a threat, especially since everyone thinks it is already dead.
The CFPB was then-law professor Elizabeth Warren’s “big idea” in the wake of the 2008 financial crisis. Warren conceived and helped design the CFPB, but when the Senate refused to confirm her as its first head, she decided to run for the Senate instead.
The design of the CFPB was a constitutional nightmare, as it ignored the separation of powers and was statutorily immune from accountability to either Congress or the president. And while the DC Circuit Court of Appeals found that the CFPB’s construction was unconstitutional, the Biden administration did its best to reanimate the agency, initiating, among other things, a rulemaking on Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Biden’s Section 1033 proposed rule was yet another nightmare. Instead of simply fulfilling the requirements of Dodd-Frank Section 1033, the Biden CFPB drafted a breathtakingly broad rule that would have been a disaster for consumer financial privacy, as well as for the delivery of efficient financial services. It was so problematic that a court order barred the CFPB from enforcing its order until it could be reissued in a revised form.
Since then, the Trump administration has zombified the agency, removing almost all funding and personnel. But despite the courts and the Trump administration determining that the agency itself is effectively illegitimate, the CFPB has continued drafting the rule.
Any new rule dictated by even a Trump administration zombie CFPB would almost certainly be overly broad and would claim sweeping new powers for the CFPB, which would be all a future administration would need to revivify this dangerous agency.
Ironically, as this Section 1033 regulatory drama has been unfolding, the financial services industry has not only continued to function well but has also been providing consumers with new and innovative products and services. Bilateral private agreements between banks and fintech companies are an area of intense growth and investment in application programming interfaces (APIs) for the safe and secure transfer of consumer data, all of which occurs without the need for governmental interference.
If there’s no need for the CFPB, there’s no need for this rulemaking.
As an agency targeted for elimination, the CFPB should be put out of its misery. The Trump administration should instruct the few remaining bureaucrats at the CFPB to cease drafting rules and finally seal the coffin shut.