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Did you know that there is an agency in Washington, DC able to wield the full power of the federal government, but whose director cannot be removed and is not answerable to the president, whose funding is not controlled by Congress, and whose decisions are difficult to challenge in court? Did you know that this agency is almost completely exempted from the Constitution’s check and balances? Did you know that this unaccountable power is vested in a single person? And did you know that this single person’s appointment was made illegally?
You might think that this describes a Soviet-era bureaucracy, but the Consumer Financial Protection Bureau (CFPB) is a part of the United States government. That name may sound warm and fuzzy, but in this case “consumer financial protection” is a euphemism for bureaucrats seeking to control the populace.
The CFPB was created as part of the Dodd-Frank banking regulation bill passed on party lines by Congress and signed into law by President Obama. The CFPB was handed control over a wide range of existing financial regulatory responsibilities as well as being granted vague new powers. Unlike past reorganizations, however, the CFPB was not set up like a normal agency or department of the federal government with senior leadership appointed by the president and confirmed by the Senate, with a budget appropriated by Congress. Instead, a new unaccountable agency was created. The ways that the CFPB is insulated from democracy are many:
The president was given appointment power over only one person: the director of the CFPB. All senior employees are in turn appointed by the director.
The president cannot remove the director except in extreme circumstances.
The CFPB is under no obligation to consult with the president’s Office of Management and Budget when creating regulations.
The CFPB’s budget does not come from Congress but rather has a dedicated revenue stream from the Federal Reserve. The CFPB is not even accountable to the Federal Reserve, as the money is granted without oversight responsibility.
The director is vested with the power to levy fines and punishments on his own initiative.
All these factors add up to an agency which is almost entirely separate from the Constitution’s checks and balances. As if all this wasn’t enough, in 2012 the president unilaterally appointed Richard Cordray to this all-powerful director position in a maneuver that was ruled illegal by the Supreme Court.
The CFPB has since become an object lesson in the importance of checks and balances as the agency has gone on an unprecedented spree of power grabs in just five years of existence. A none-exhaustive list includes:
The agency began collected the credit data of up to 600 million American financial accounts, with what the Government Accounting Office describes as inadequate privacy security measures. After this was revealed, a Zogby poll found that 55% of Americans believe that the CFPB’s data collection methods are as intrusive as the NSA.
The agency moved to harm auto dealers offering loans, despite Dodd-Frank specifically exempting auto dealers from CFPB oversight. The CFPB made this decision on the basis of a study claiming to find racial discrimination, even though it is illegal for applicants for auto loans to disclose race on their applications. The study used a methodology to guess the races of applicants that the CFPB itself admitted had an error rate of at least 20%. No wonder even Democrats said: “The CFPB has done the dealers a massive injustice.”
At the behest of trial lawyers, the agency has proposed a rule to expand class action litigation in consumer finance. 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 came up with entirely unneeded rules for pre-paid debit cards which threaten to significantly curtail that convenient, innovative product.
The agency recently proposed new rules to eliminate short-term financial options for poor Americans.
Despite having no authority to do so, the agency attempted to claim authority over education accreditation, before being smacked down by a federal court.
If this list sounds like an agency out of control to you, you are not alone.
It is possible, though, that this out of control bureaucracy may soon be curtailed. In July of 2015, the DC Circuit Court of Appeals, reversing a lower court, allowed a lawsuit challenging the constitutionality of the CFPB to proceed. Additionally, in a hearing this year also before the DC Circuit, Judge Brett Kavenaugh remarked: “You are concentrating huge power in a single person and the president has no power over it.” The consumer bureau, he said, has a “very unusual structure” that has “few precedents.” There may be some in the judicial branch that have finally taken notice of the CFPB’s unconstitutionality.
Far from consumers needing the CFPB to protect them, it is clear that Americans need protection from the CFPB. It is long past time that this unconstitutional agency is brought under control.