Reforming CFPB isn't enough. Eliminate it.

The Consumer Financial Protection Bureau has a positive-sounding name. But in five and a half years since its creation, the CFPB has proven that the agency is merely an excuse for a massive expansion of federal regulatory power. The CFPB doesn’t protect consumers, as its name suggests. Rather, the American people need protection from the CFPB.

It’s time to end this failed experiment. Let’s return the CFPB’s regulatory responsibilities to the specific departments and agencies covering the relevant industries, and of course, to the states that have been responsible for basic consumer protection for a long, long time. I should know. As a former attorney general of Virginia, I took my responsibility to protect consumers seriously.

The Dodd-Frank Act created the CFPB as an unaccountable agency, with a director that could not be removed, a budget from the Federal Reserve that was self-determined, and sweeping legislative, judicial and executive powers vested in the person of the director. Indeed, this design was such an affront to the U.S. Constitution that a U.S. Court of Appeals for the D.C. Circuit declared the agency’s single-director structure unconstitutional.
In what should be an unsurprising development, the CFPB has abused its unaccountable power. A non-exhaustive list of executive overreach from the CFPB in its five short years includes:

• The agency began collecting the credit data of up to 600 million American financial accounts in 2012, with what the Government Accountability Office described in 2014 as inadequate privacy security measures. After this practice was revealed, a Zogby Analytics poll found that 55% of Americans believe that the CFPB’s data collection methods are as intrusive as the National Security Agency monitoring program.
• Despite a Dodd-Frank provision exempting auto dealers from CFPB oversight, the agency found a way around that by cracking down on indirect auto lending relationships. The CFPB started citing auto finance companies because of a study claiming to find racial discrimination in the dealer pricing for auto loans. But the study used a methodology to guess the race of applicants that the CFPB itself admitted had an error rate of at least 20%. It’s no wonder that even Rep. David Scott, a Georgia Democrat, said: “The CFPB has done the dealers a massive injustice.”
• In a gift to trial lawyers, the agency pursued a rule to expand class action litigation in consumer finance. The attempt occurred even though the agency’s own study found that consumers recover an average of $5,389 per individual arbitration claim, while only recovering an average $32.25 per class action claim.
• The agency wrote unneeded rules for prepaid debit cards — rules that threaten to significantly curtail the convenient and innovative product.
• The agency proposed rules on payday loans and other forms of short-term credit that in fact would eliminate short-term financial options for poor Americans.
• Despite having no authority to do so, the agency attempted to claim authority over education accreditation in order to investigate the accreditation process for for-profit schools, before a federal court smacked down the attempt.

The CFPB has been agency out of control — drunk on power. Even with the limitations imposed by the D.C. Circuit in its ruling, far too much power remains concentrated in the hands of the CFPB director. Furthermore, the agency remains beyond the power of Congress to control its activities through the power of the purse.

Rather than tinkering with this regulatory monstrosity, let’s pursue a simpler course: simply eliminate the standalone agency. Most of the regulatory powers that the CFPB now wields were previously under the jurisdiction of other departments and agencies. These entities often specialized in the specific industry being regulated; thus, they were more capable of informed, responsible action than the CFPB.

Remember what now-Chicago Mayor Rahm Emanuel said: “Never let a crisis go to waste.” That mentality gave us the CFPB — now it’s time to be rid of the agency once and for all.

Ken Cuccinelli is the general counsel to the FreedomWorks Regulatory Action Center and a former attorney general of Virginia.