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The Consumer Financial Protection Bureau Is Unaccountable. Trump’s Budget Tries to Change That.

The president’s budget would give Congress more oversight over the agency’s finances.

CordrayRon Sachs/CNP/TNS/NewscomAs a result of its unique structure, the Consumer Financial Protection Bureau (CFPB) is insulated from accountability by the democratically elected branches of government. While there are efforts underway to fix this, they have so far been frustrated.

Now the Trump Administration is taking another swing—this time through its proposed budget. Whether this effort will fare better than the others remains to be seen, but there is not much reason for optimism.

The CFPB's insulation from democratic accountability takes two forms. First, it's headed by a single director who serves a five-year term and can only be removed for cause. Most agencies with for-cause protection are led by bipartisan commissions, where the commissioners can at least check each other to a degree; an agency led by a sole director has the ability to pursue strictly partisan goals. While some administrations may seek to exploit this opportunity, the structure also limits a president's ability to offer necessary oversight over the agency, and could potentially allow a director from a prior administration to occupy the CFPB for the entirety of a new president's term.

Second, the CFPB's budget is not controlled by Congress. Instead of being funded by tax dollars subject to appropriations, the CFPB is funded from the earnings of the Federal Reserve System—in the amount the CFPB director thinks necessary (though capped at twelve-percent of the Fed's total operating expenses). The director has wide latitude to allocate those funds as they see fit.

This prevents Congress from using one of its main tools—the power of the purse—to check a director's actions. While the Senate gets a say on who the director is through the confirmation process, the House of Representatives has almost no leverage with the CFPB.

Yes, there is a yearly hearing where committee members get to yell impotently at the director, but the only check the House has is the Congressional Review Act, which allows Congress to undo a recently promulgated regulation. Neither of these opportunities provide control over enforcement actions or the director's priorities.

It seemed as though the best chance to reform the CFPB's structure was through a 2015 lawsuit brought against it by PHH Corporation. PHH argued that the CFPB's structure was unconstitutional because the director was unaccountable, and therefore the agency should be shut down. In 2016 a panel of the United States Court of Appeals for the District of Columbia Circuit agreed with PHH.

Importantly, however, the Panel declined to void the CFPB. Instead they sought to cure the constitutional defect in the statute by striking the director's for-cause protections. This would mean that the director served at the pleasure of the president, and given that then-Director Richard Cordray did not please President Trump, the expectation was that he would be promptly removed. The CFPB then appealed the decision to the full D.C. Circuit, which granted the appeal and vacated the panel decision. The full D.C. Circuit recently released

its opinion, which, contrary to an amicus brief filed by the Trump administration, held that the panel was wrong and that a sole director who could be fired only for cause was constitutional.

While PHH could in theory appeal to the Supreme Court, that seems unlikely due to other aspects of the case. So, where does this leave the CFPB?

For the time being, the director's for-cause protections appear safe. While there are other cases working their way through other circuits, those will, at best, take a while to resolve.

That brings us to President Trump's proposed budget. With the courts looking like an unlikely venue in the short term, the administration is turning to Congress. If passed, the president's proposed budget would place the CFPB under congressional appropriations in order to "impose financial discipline, reduce wasteful spending, and ensure appropriate congressional oversight."

The odds of this actually happening are slight.

It would require having the votes to overcome a potential filibuster in the Senate, and there appears to be little appetite among Congressional Democrats to enhance their own institution's power. As such, while we can hope for more structural accountability at the CFPB, we probably shouldn't count on it anytime soon.

Photo Credit: Ron Sachs/CNP/TNS/Newscom

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  • Sevo||

    The SF Chron, natch, is treating this as if the name had something to do with the actual activity, sorta like they treated "Net Neutrality".
    I don't think the editorial staff is bright enough to be actively engaged in subterfuge, just stupid enough to believe it.

  • Rebel Scum||

    And what of the H&R squirrels?

  • Unlabelable MJGreen||

    The analysis so nice they posted it twice.

  • Rockabilly||

    But how will I know what's good for me if the governments don't tell me?

  • Palin's Buttplug||

    California and federal regulators fined Wells Fargo a combined $185 million on Thursday, alleging the bank's employees illegally opened millions of unauthorized accounts for their customers in order to meet aggressive sales goals.

    A staggering 5,300 employees at Wells Fargo were fired in connection with this behavior, according to the Los Angeles City Attorney's office.

    The San Francisco-based bank will pay $100 million to the Consumer Financial Protection Bureau, a federal agency created five years ago; $35 million to the Office of the Comptroller of the Currency, and $50 million to the City and County of Los Angeles. It will also pay restitution to affected customers.

    Good on them. I hate grifters like Wells Fargo and no one else will do the job.

  • Rhywun||

    The San Francisco-based bank will pay $100 million to the Consumer Financial Protection Bureau

    That is a lot of hookers and blow. Man, they must be partied out by now.

  • Last of the Shitlords||

    Even all that isn't enough. A bunch of those WF executives and managers should be prosecuted and serve time for what they did. Thieving piece of shit.

  • BYODB||

    Progressivism will install more and more institutions like the CFPB purely because they need to 'insulate' their ideology from the people they claim to want to help.


    Because, after all, what we really need protection from is ourselves and they truly know what's best for everyone. They are the shepherds, we are the sheep.


    You see this every time but for some reason we still try to be 'friends' with Progressives. They are the anti-thesis of Libertarianism in every way.

  • Hunthjof||

    Worse is the power they are giving these agencies. People fail to understand this agency can not only control the finance sector but pretty much any other sector they wish. They can intimidate banks to not deal with industries that don't comply with progressives vision. In the gun control debate they could intimidate banks to not deal with firearms dealers who sell AR-15's. Banks know it won't be hard for the CFPB to find something to fine them and will be more then willing to comply especially smaller banks.

  • Gaear Grimsrud||

    "Yes, there is a yearly hearing where committee members get to yell impotently at the director"
    Sounds like business as usual.

  • Presskh||

    The CFPB was illegally turned into a government-run shakedown organization under Obama, funneling at least $150 million to Democrat activist organizations. This was just one of scores of illegal activities under the Obama/Clinton criminal cabal tenure that warrants a special prosecutor and jail time for the perpetrators. I tried to post a link discussing this in a 6/17/15 Investors Business Daily article, but the link was 50 characters long and Reason would not let it post.

  • Last of the Shitlords||

    This is just another justification for what I've been saying for months now. If Jeff Sessions isn't spending nearly every waking minute putting democrats in prison, he's doing it wrong.

  • SunkCost||

    CFPB was given independent funding and autonomy because otherwise the banks would use their toadies on the Hill to gut it's budget the same way they did with the SEC. If you don't believe me, look at all the scam links that populate this and every other reason post...

  • Hunthjof||

    Yup cause that is what I want an unaccountable agency that appoints it's own directors who have their hands on the nutsack of the financial sector who have their hands on the nutsack of the rest of our economy and as a default society as a whole. Sounds like a great idea. While I am at it I will hit my own nutsack with a hammer cause it sounds about as logical.

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