Consumers are being harmed by the same federal agency that was created to protect them after the 2007 recession, but none of the three branches of government can do much about it, according to a report released Thursday by a conservative nonprofit think tank.
The Consumer Financial Protection Bureau (CFPB) – an independent agency established under the 2010 Dodd-Frank Act – is costing, rather than saving consumers money, according to the Competitive Enterprise Institute’s report. The law also exempted CFPB from the oversight that typically applies to federal agencies. (RELATED: Reforming Elizabeth Warren’s Consumer Agency Would Cut $24 Billion From The Deficit)
The CFPB’s “problems are so fundamental that it should probably be abolished,” the report reads. The agency was largely designed by now-Sen. Elizabeth Warren, the Massachusetts Democrat who was then a major advocate and had not yet run for the Senate. (EXCLUSIVE: Gravy Train Flows Wide And Deep At Elizabeth Warren’s Consumer Agency)
CFPB is “actively harming consumers, pressing ahead with regulations even when the benefit to consumers is likely to be outweighed by the costs,” the report’s author, Iain Murray, said in a statement. “The CFPB would be far less able to abuse its power and make bad decisions if it were held accountable.”
The report said that “CFPB has also failed in its core mission of protecting all consumers” and noted the agency’s failure to notice Wells Fargo’s abusive practices before the Los Angeles Times exposed them.
Additionally, CFPB rules have harmed consumers because of its “one-size-fits-all mentality,” the report said.
CFPB, for example, denies customers access to products that could actually save them money. Adjustable rate mortgages, for example, are appropriate choices for certain borrowers.
CFPB’s rules are also often extremely long and complicated because of the complexity of financial products. Complying with those rules can create large costs to financial institutions, which are passed on to customers.
Meanwhile, statutory provisions within Dodd-Frank allowed CFPB to skirt oversight from the president, the courts and Congress. The report listed how the agency avoids accountability from each branch:
- The CFPB’s funding comes from the Federal Reserve, rather than from congressional appropriations;
- A single director appointed by the president heads the agency for a fixed five-year term and can’t be fired except for cause; and
- Federal courts must rely on CFPB’s interpretations of laws in crucial cases.
“These provisions violate constitutional norms of checks and balances on executive power and have led the CFPB to abuse its power, including by trying to regulate in areas where its statutory authority is expressly limited,” the report said.
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