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Lawmakers from both political parties on Tuesday sharply criticized the Consumer Financial Protection Bureau's attempt to restrict or eliminate auto dealers' ability to markup a loan by citing their partnering lenders, arguing it would result in higher prices for consumers.
September 29 -
On the five-year anniversary of Dodd-Frank, it's time to increase accountability and transparency at the CFPB. Congress should start by passing a bill that would overhaul the agency's organizational structure from a single-director model to a bipartisan, five-person commission appointed by each incoming president.
July 21
WASHINGTON — A handful of moderate Democrats supported a controversial bill to restructure the Consumer Financial Protection Bureau, helping the House Financial Services Committee approve the legislation.
The debate highlights a growing divide among some party moderates and more progressive lawmakers who remain opposed to changing core aspects of the Dodd-Frank Act. The Financial Product Safety Commission Act would establish a five-person board structure, replacing the single director currently at the helm of the consumer agency.
"A bipartisan commission is common throughout the federal government," said Rep. Randy Neugebauer, R-Texas, a lead sponsor of the bill. "A bipartisan leadership structure can help address regulatory imbalances, imperfections or in some circumstances, political policy decisions."
The legislation includes a provision that the transition is effective when three out of five commissioners have been named by the president and confirmed by the Senate. The measure also sets aside $75 million in surplus funds from the Federal Reserve banks to pay for the commission over ten years. The banking panel debated the bill on Wednesday, and passed it 35 to 24.
Three Democrats, Reps. Kyrsten Sinema of Arizona, David Scott of Georgia and Brad Ashford of Nebraska, are cosponsors on the legislation, along with 45 GOP lawmakers. Scott and Sinema were the only two Democrats to support the bill (Ashford is not on the panel) but several other Democrats suggested the general idea of a commission structure.
"To my mind, a commission structure directionally could be the right way to govern an organization like the CFPB, provided the commission is structured appropriately and the transition from a director to the commission is done successfully," said Rep. John Delaney, D-Md.
Delaney said a commission could provide "better continuity" between presidential administrations, help make the agency less politicized and allow for "a more enduring entity."
He offered but withdrew an amendment that would require all five commissioners to be confirmed before the change is effective and allow the director at the time to sit on the commission. He and Neugebauer said they would continue to discuss the issue, including any constitutional concerns with permitting the director to join the commission.
The partisan shift is a change from the last Congress, when a similar bill was approved in November 2013 along party lines.
The measure was later packaged with several other changes to the CFPB, including a more divisive move to subject the agency to Congressional appropriations, which passed the House 232-182. Ten Democrats voted for the measure, though that count includes none of the supporters this time around. Six of the Democratic members who voted for the bill last year are no longer serving in Congress.
Rep. Brad Sherman, D-Calif., meanwhile, added at the markup that he also worries about continuity issues during transitions at the White House, suggesting he could be supportive of the effort down the line.
"The purpose of this bill I fully understand — and that is we should not have the very controversial decisions that are made by the CFPB swing broadly back and forth from left to right based on who's elected president," he said.
At the same time, Sherman said he remained undecided about the impact of the measure in the long term. He added that the agency's current director is "doing a good job," the bill costs $75 million and isn't likely to be signed by President Obama.
He also cited ongoing efforts by Rep. Denny Heck, D-Wash., around another bipartisan bill addressing the structure of the agency. Neugebauer said that negotiations are ongoing between him and Heck.
"When you're in doubt, it makes sense to wait, to work something out on a bipartisan basis, and if you're still in doubt, and you're evenly poised, you save the $75 million," Sherman concluded.
At the same time, many other Democrats remained adamantly opposed to the bill, warning that it would undermine the CFPB's powers.
The change "is an attempt, in my estimation, to stifle the functioning of the agency and to empower industry to exert more influence over CFPB decision-making," said Rep. Maxine Waters of California, the committee's ranking member and a vocal defender of Dodd-Frank.
Rep. Carolyn Maloney, D-N.Y., added that moving to a commission structure could slow down the agency's functioning, rendering it unable to keep pace with new financial products.
"The reason that we need a flexible and efficient CFPB is that the financial industry is quick to innovate," she said. "As many of us have said, the main problem with the financial crisis is that the … regulation didn't keep up with the innovation."
Whether the effort wins a vote on the House floor or attention in the Senate remains to be seen. It's unclear whether Senate Democrats are wrestling with a similar divide on the issue, and Republicans would need support from at least a handful of lawmakers in the other party to avoid a filibuster.
A bill passed by the Senate Appropriations Committee in July includes a provision that would change the CFPB's structure to a commission, but that bill was opposed by all panel Democrats.
The White House would almost certainly veto a standalone bill changing the CFPB's structure, though it will be crucial to watch whether the measure slips into a must-pass bill in coming months and becomes part of the yearend debate.
The House Financial Services Committee also passed a handful of other measures. Two bills — one that would establish an independent inspector general at the CFPB and another to delay National Credit Union Administration's risk-based capital rule for further study — passed with significant bipartisan support. Two other bills — one to delay the Department of Labor's fiduciary standard bill until after the Securities and Exchange Commission has acted on the issue, another to remove a Dodd-Frank requirement that firms disclose the pay ratio between their chief executive and the average worker — passed along narrower lines.
