Protecting Us From an Agency Created to Protect Us
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By Merrill Matthews
Unaccountable 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, which just passed its fifth anniversary.
Texas Rep. Jeb Hensarling calls it "the single most unaccountable agency in the history of America." Indeed, 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 with no end in sight. Originally, 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 for mischief.
The CFPB is a regulatory monster, attacking anything that manages money: credit unions, payday lenders, student debt, and more.
Take credit unions. No one thinks that credit unions were responsible for the financial meltdown that began in 2008. Yet they have been hit with over 6,000 pages of regulations since 2009, with most coming from the CFPB. Big Wall Street players, by contrast, have mostly gotten off scot-free.
The CFPB is also working to shut down payday lenders -- 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'd have to charge disproportionately higher fees.
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 money to cover it.
If there are bad actors in the payday lending industry, then go after them. But the industry helps people who need small amounts of money immediately.
Further, consider student debt. President Obama and the CFPB are increasingly concerned about the growing burden of student debt, which has exploded under the president. Student debt now stands at $1.2 trillion -- over triple what it was a decade ago.
The problem started when Obama decided the federal government could do a better job of handling student loans than the private sector. Since 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 to credit unions, payday lending and other financial institutions.
But clearly, the entity most in need of regulation right now is the Consumer Financial Protection Bureau. Congress members -- and the presidential candidates -- need to explain how they will regain control over this out-of-control agency. In short, who will protect us from this agency created to protect us?
Merrill Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas. Follow at twitter.com/MerrillMatthews