Reform the CFPB to Better Protect Consumers

Five years ago, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law as one of the largest financial overhauls in our nation’s history. The American people were told the law was necessary to ensure stability in the financial sector and prevent future meltdowns. But instead of responsibly studying the root causes of the crisis, Democrats in Washington rushed to regulate and threw a blanket over our entire financial system. Over 400 new rules stemming from the 2,300-page law designed for Wall Street have had unintended consequences for Main Street’s small businesses and community financial institutions.

As members of the House Financial Services Committee, and through our prior business experiences as a community banker and small business owner, we have seen firsthand how misguided Washington regulations are impacting individuals and families across America.

Our home state of Texas alone has 115 fewer community banks since the implementation of Dodd-Frank. Considering that 51% of all business loans under $1 millionnationwide are issued by local banks and credit unions, according to the Independent Community Bankers of America, the effects of this sweeping overhaul have trickled down to local job creators who had nothing to do with the financial crisis.

Small financial institutions have had their resources drained by a constant onslaught of regulation.Since 2007, community banks have faced 153 new final regulations, 87 compliance changes and 59 annual adjustments to thresholds. Each time a rule is changed, community banks and credit unions absorb the costs. They must take the time to understand the new requirement, modify processes, train staff and produce new forms and material. These constitute opportunity costs, since resources could be better spent hiring more workers and catering to the needs of customers. Instead, they are too often forced to cater to Washington.

The Congressional Budget Office and Government Accountability Office have both estimated that Dodd-Frank cost $3 billion to implement and will result in nearly $27 billion in private-sector fees, assessments and premiums. In our slow-growth economy, we cannot afford this.

The Consumer Financial Protection Bureau is responsible for some of the most consequential regulations that are hurting economic growth and stifling opportunity for individuals and families across America. While in name this sounds like a laudable agency, in reality the CFPB continuously issues one-size-fits-all, Washington-knows-best regulations that harm consumer choice, decrease credit availability, and increase costs across the board for consumers and hardworking businesses. As Republicans, we believe in consumer protection — but we believe it must be smart, tailored, and politically neutral.

To more efficiently and effectively protect consumers while enabling our economy to reach its full potential, we must increase accountability and transparency at the CFPB. This will require some common sense reforms. To start, the CFPB is currently led by a single director who has far too much power over the entire U.S. financial sector. This means that the bureau can make major decisions with little input from small businesses and almost no discourse with those of dissenting opinions. The American people deserve better.

The Financial Product Safety Commission Act of 2015, introduced by Rep. Randy Neugebauer, would alter the CFPB’s structure and introduce a bipartisan, five-person commission appointed by the President to manage its work. This structure was originally suggested by then-professor and current Sen. Elizabeth Warren, former House Financial Services Committee chairman Barney Frank, and even President Obama. A commission structure would provide some much-needed checks and balances and would protect the work of the CFPB from the winds of political change with each incoming presidential administration. We aregladthat our Democratic colleagues have recognized the importance of this bill and have lent their support as cosponsors. Congress should take this opportunity and swiftly move it to the President’s desk.

Meanwhile, while the CFPB has the ability to exempt smaller financial institutions from rules and regulations intended for larger banks, it has often failed to utilize this authority. For this reason, Rep. Roger Williams introduced the Community Financial Institution Exemption Act. The bill would require the CFPB to explain to community banks and credit unions why they are not exempted from certain CFPB regulations as permitted in Dodd-Frank.

On this fifth anniversary of Dodd-Frank, it is increasingly clear that our friends and neighbors on Main Street are suffering as a result of this flawed law. Congress must work together in a bipartisan manner to provide much-needed regulatory relief, better protect consumers, and make America stronger for generations to come.

Rep. Randy Neugebauer is chairman of the House Financial Institutions and Consumer Credit Subcommittee. Rep. Roger Williams is a member of the House Financial Services Committee.