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One Solution to the CFPB's Problems: Pass the Financial CHOICE Act

My new paper, The Case against the Consumer Financial Protection Bureau: Unconstitutionally Structured and Harmful to Consumers, which is out today, makes the case for reform of the CFPB as being necessary to preserve constitutional government and to protect consumers from its overreach.

One way to achieve this would be to pass the Financial CHOICE Act (FCA), which meaningfully addresses several of the criticisms of the CFPB outlined in my report. The FCA would:

  • Change the governance structure of the agency and how it is funded to make it more accountable to the American people and to fit within constitutional norms. 
  • Make the head of the agency removable at the will of the president.
  • Subject the agency to the congressional appropriations process in its funding.
  • Give courts of law wider latitude to overrule agency decisions if they believe it necessary.
  • Refocus the agency to enforce and promote market competition and effective civil enforcement of consumer protection laws.
  • Restructure the agency as a civil enforcement agency, much like the Federal Trade Commission.
  • Rename the agency to reflect its true purpose: Consumer Law Enforcement Agency.
  • Repeal the agency’s authority to deny consumers access to products the agency deems “unfair, deceptive, or abusive”
  • Repeal the agency’s authority to enact rules that expand its own powers to foray into markets not explicitly approved by Congress.
  • Force the agency to conduct thorough cost-benefit analysis before any new regulation is adopted, and requires major new regulations to be approved by Congress.
  • Invalidate the CFPB’s rules on payday loans and arbitration agreements.

While the FCA can be expected to meet serious opposition in the Senate, as Norbert Michel of the Heritage Foundation argues, some parts of it can be attached to the budget reconciliation process, which faces a lower hurdle for passage. The CFPB reforms fall into that category, as they have a clear effect on the budget by bringing the agency within the appropriations process.

Passing those FCA provisions will go a long way toward solving the problems posed by the unaccountable, overreaching CFPB.