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ACLU Blasts Federal Bank Regulators for Unconstitutional Power Grab

Unaccountable agencies unsurprisingly behave in an unaccountable manner. The Consumer Financial Protection Bureau (CFPB) was recently found by a federal court to be so unaccountable that it rose to the level of unconstitutionality.

An example of why the agency had to be reined in comes in an obscure rulemaking exercise that the CFPB is currently undertaking, entitled “Proposed Amendments Relating to Disclosure of Records and Information,” which has come under fire from the American Civil Liberties Union.

As the ACLU explains in its comments on the rule, it does not routinely monitor CFPB rulemakings. Perhaps it should, for as ACLU National Capital Area Legal Director Art Spitzer argues, the Bureau has decided in this rule that it can impose prior restraints on speech, something that courts have time and again said violates the First Amendment. The CFPB rule would forbid recipients of civil investigative demands (CIDs) and other confidential investigative requests from disclosing to others that they had received them without permission from the Bureau.

As Mr. Spitzer points out, courts have found that “[p]rior restraints on speech and publication are the most serious and the least tolerable infringement on First Amendment rights.” He goes on to point out the absurdity that the Bureau will post petitions against CIDs on its own website as part of its “commitment to transparency.” As he says,

It is difficult to imagine the justification for a system where a CID recipient is barred from posting information about a CID it has received on its own website, but the Bureau will post information about the same CID on the Bureau’s website if the recipient has the temerity to file a motion to quash the CID—even if the motion to quash is successful.

Finally, he points out that the Bureau’s proposed rule goes beyond even what is required in the name of national security.

Mr. Spitzer’s comments are echoed by House Financial Services Committee Chairman Jeb Hensarling, who says in his comments that the Dodd-Frank Act did not authorize such a rule from the CFPB “for very good reason.” That reason was simple:

The Bureau could engage in unwarranted fishing expeditions and then use its confidentiality to gag its target. Because of the potential for government abuse and First Amendment and due process implications, Congress has typically limited such arrangements to investigations with national security implications.

Yet the rule’s problems do not end there. As organizations like the National Association of Federal Credit Unions and the Electronic Transactions Association pointed out in their comments, the rule also gives the CFPB the power to share confidential information with domestic and international governmental bodies that have no jurisdiction over the regulated parties, despite the Dodd-Frank Act having unambiguously limited information sharing to agencies “having jurisdiction over” regulated entities.

Once again, it is up to Jeb Hensarling (in a separate comment) to spell out exactly what the Bureau is proposing here. The Bureau wants to be able to share its information with “foreign regulators, foreign law enforcement agencies, state bar associations, state licensure agencies, and potentially even law firms hired by state attorneys general.” The potential for fishing expeditions increases almost exponentially when information is shared with so many other parties.

The CFPB’s disdain for the rule of law is quickly becoming a national crisis. Not only does the Bureau need proper oversight from the executive, it needs it from Congress too (which is the focus of CEI’s court case against the agency). The legislature must assert the power of the purse over the Bureau (which currently draws its funding not from appropriations but from the Federal Reserve) and exercise proper oversight before the Consumer Financial Protection Bureau becomes the Consumer Financial Protection Racket. It may already be too late.