What the CFPB 'Commission' Debate Is Really About

The financial services industry is pushing hard for Congress to change the single director Consumer Financial Protection Bureau into a multimember commission under the guise of "good government." Let there be no mistake what this is really about: the proposal for a commission structure is a backdoor attack on the very existence of the CFPB as an agency.

The financial services industry doesn't have the courage to attack the CFPB, an immensely popular agency, directly. So instead, the strategy is to try to render it ineffective by changing it from a single-director structure to a five-member commission.

Commission proponents make three principal arguments. All are specious. First, commission proponents argue that a multimember commission is more accountable than a single director. This is illogical. With a multimember commission, accountability is diffuse; it's easy for commission members to point fingers at each other and mutter about necessary compromise. With a single director, it's clear where the buck stops.

Second, commission proponents argue that a commission will be less likely to undertake arbitrary actions or abuse its power because commission structures encourage dealmaking and compromise. This ignores the reality of bipartisan commissions. These commissions operate according to majority rule, and the partisan majority (especially in the current environment) will simply ignore and roll the minority. Minority commissioners are not a meaningful check on partisan majorities abusing power or acting in an arbitrary manner. The real check on agency overreach is the courts.

The idea that commissions foster compromises and dealmaking also ignores the Government in the Sunshine Act, which requires that any discussions between more than two commissioners be held in public. This open meeting requirement effectively precludes deliberative discussion within a commission and impedes negotiated compromises. But even if commissions could engage in dealmaking, that would actually result in suboptimal, arbitrary compromises, rather than the substantively right policy.

Third, commission proponents argue that a commission furthers policy stability. A commission with staggered terms might add marginally to policy stability, but the biggest assurance of policy stability is the Administrative Procedures Act. The APA bars rulemakings from being issued or repealed willy-nilly. They must go through a formal notice-and-comment process and be supported by substantial evidence. An agency cannot simply repeal or change an existing rule because it doesn't like it politically. The APA's adjudication provisions, the principle of binding precedent and judicial review of adjudication similarly adds policy stability on enforcement actions.

The arguments for a multimember commission ultimately miss the point. The whole reason for congressional delegation to agencies is effective policy implementation. The Congress itself is incapable of implementing and administering the nitty-gritty details of policy. Congress delegates these responsibilities to agencies because it wants the policy directives it legislates to be carried out. Single-director agencies, like the CFPB, Federal Housing Finance Agency and Office of Comptroller of the Currency, have been much more effective at implementing policy than squabbling, multimember commissions.

Consider the effectiveness of multimember commissions. The poster child for commission dysfunction has got to be the poor Federal Election Commission, which has a 3-3 partisan deadlock so bad that its own chair has stated, "People think the FEC is dysfunctional. It's worse than dysfunctional."

Agencies with odd numbers of commissioners can also end up deadlocked if a commissioner has to recuse herself, as Securities and Exchange Commission Chair Mary Jo White often had to do. Indeed, some have even suggested that businesses might deliberately exploit this situation by hiring her husband's law firm in order to ensure White's recusal and a subsequent partisan deadlock.

And even when multicommissioner agencies lack partisan deadlocks, they are often ineffective. The SEC, for example, has still not completed several of its Dodd-Frank Act rulemakings, and the Commodity Futures Trading Commission has yet to finalize a critical position limits rulemaking. In contrast, the single-director CFPB completed all of its Dodd-Frank rulemakings on time even while simultaneously staffing up an agency from scratch.

Indeed, under a commission structure, there is no guarantee that all the seats on a multimember commission will even be filled, raising the specter of either a lack of quorum or a lack of partisan representation on one side. The National Labor Relations Board did not have five Senate-confirmed commissioners from 2003 until 2013, and lacked even a quorum from 2007 to 2009 and again in 2011. Similarly, the Federal Reserve Board has had two vacancies since 2013, and has never filled the position of vice chair for supervision. Committee-structured agencies wither through congressional inaction, but vacancies at single-director agencies are immediately filled by fully empowered acting directors.

The push for a commission structure at the CFPB is about ensuring less-than-effective consumer financial protection regulation. A commission structure would ensure an ineffective, feeble CFPB, while avoiding the political backlash of a direct attack on an agency that has in the course of five years returned over $11.7 billion improper fees and charges to consumers, in addition to the savings that consumers have garnered from fairer financial institution practices and more transparent markets. Congress should let the CFPB keep doing its job.

Adam J. Levitin is a professor of law at Georgetown University. He is a former member of the CFPB's Consumer Advisory Board.