A certain presidential candidate made that phrase famous. But whoever is elected to the White House this November should say those words to the head of a rogue government entity, which the courts have finally forced into providing a measure of accountability.
On October 11, the U.S. Court of Appeals for the District of Columbia Circuit gave the next president the power to remove the director of the Consumer Financial Protection Bureau (CFPB), an entity created by the Dodd-Frank “financial reform” of 2010 with broad powers to ban any financial product it deems “unfair, deceptive, or abusive.” The court called CFPB Director Richard Cordray “the single most powerful official in the entire United States Government,” other than the president, due to “the CFPB’s broad authority over the U.S. economy” combined with the fact that he could not be removed by the President.
The court declared this arrangement unconstitutional and made Cordray subject to at-will removal by the President. As a result, the President now can fire the CFPB director as easily as he or she can dismiss a Cabinet secretary from a previous administration. And given that both major-party candidates have endorsed reining in overregulation, they should dismiss Cordray due to his sweeping and arbitrary mandates, which are strangling small and innovative new financial firms.
Both Hillary Clinton and Donald Trump have called for some type of regulatory relief for some firms. Trump has called for repealing regulations in general and dismantling much of Dodd-Frank. Clinton has vowed to “defend” Dodd-Frank, but she has also called for paring back regulation on community banks and credit unions.
In his tenure to date, Cordray has worked against both objectives. Leaders of community banks and credit unions are shouting from the rooftops about the flood of red tape from the CFPB.
An August letter to Cordray from the Credit Union National Association and several state credit union associations called the CFPB’s regulatory approach “terribly troubling” and “baffling.” Noting that the cost of the regulatory burden on credit unions has increased from $4 billion in 2010 to $7 billion in 2014, the letter warned that CFPB rules are limiting credit unions’ ability to provide affordable financial products to their customers and are making “it harder for credit unions to fulfill their mission.”
The sheer volume and number of pages of CFPB regulations can overwhelm small credit unions and banks. Community banker Jim Purcell, CEO of State National Bank of Big Spring (Texas), says the CFPB creates “regulatory uncertainty” through its constant promulgation and revision of regulations with little input from the public. Purcell told MainStreet.com:
"As the CFPB’s own website shows, its rulemakings are the subject of constant, significant revision—and that’s when the CFPB bothers with express rulemakings at all, instead of regulating informally through case-by-case ‘guidance’ and enforcement proceedings."
Purcell’s bank, which hadn’t had a foreclosure in decades, nevertheless found the cost of CFPB’s new mortgage rules too high to justify issuing new mortgages. The bank is a co-plaintiff with my organization, the Competitive Enterprise Institute, and the conservative seniors group 60 Plus Association, in a lawsuit challenging the CFPB’s constitutionality on several grounds.
Many CFPB rules aimed at alleged bad actors hit community banks and credit unions the hardest. One such example is the recently proposed rule cracking down on small loans that was supposedly aimed at payday lenders. But as my colleague Iain Murray and I noted in our comments to the CFPB, many other financial firms will be affected, leading to a possible massive shortage of consumer credit:
"Credit unions, community banks, and many other financial institutions that are frequently praised for treating consumers fairly express strong concern that this proposed rule will impair their ability to offer borrowers financial products that fit their needs."
Innovative new FinTech firms may also be stifled by CFPB mandates. Though Cordray said some nice things about FinTech innovators this week in his keynote speech at the Money20/20 conference in Las Vegas, his agency’s new rule on prepaid debit cards doesn’t exactly echo those sentiments.
The rule lumps in new payment apps and digital wallets, such as Venmo and PayPal, as “prepaid cards.” As Consumers Research Executive Director Joe Colangelo has noted, “the new rules dictate every detail of how fees are disclosed to consumers—right down to the font size and colors used.” While font size and color rules may be overly prescriptive but otherwise trivial when it comes to print documents, these one-size-fits-all rules could strike at the heart of the design of a new type of app.
More problematic, the rule forces these innovators to reimburse customers for customer errors in the same way credit cards do. But new payment apps may not be able to absorb these costs in the same way large credit card banks can. Shouldn’t consumers be the ones to decide whether to weigh these risks against the benefits of the new payment methods?
To top it all off, Cordray has also shown a general arrogance when questioned by elected officials about CFPB spending and priorities. When Rep. Ann Wagner (R-Mo.) asked him in a hearing about the CFPB’s renovations of its new building that so far have cost $215 million, Cordray replied, “Why does that matter to you?”
The next president should answer Cordray by replying, “Because I—and the American people who elected me—are your boss, and we’re firing you!”
Originally posted at Forbes.