CFPB’s Structural Flaws Come To Light Amid Change In Leadership

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Dennis Shaul Chief Executive, Community Financial Services Association of America
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Kathy Kraninger’s confirmation process to become the next Director of the Consumer Financial Protection Bureau (CFPB) has barely begun, yet already some congressional Democrats are attempting to block approval of this longtime public servant.

Political interference in the workings of the allegedly-independent Bureau is nothing new, however, and underscores the major flaws in the CFPB’s structure specifically its single director. This partisan interference will pervade the Bureau regardless of which party controls the White House or Congress, and it must be addressed.

When Congress created the CFPB as part of the Dodd-Frank Act of 2010, it envisioned a Bureau that was independent from any branch of government and could conduct its work free from partisan influence.

While no bill can lead to a perfect outcome, it would have been hard to imagine the extent to which the Bureau became a partisan agency under the leadership of former Director Richard Cordray.

From its very inception, the CFPB’s leadership apparatus has been a point of contention. Republicans in Congress immediately recognized the outsized influence that the Director would have on the Bureau’s actions and the unconstitutional authority the Director has as a bureaucrat unaccountable to both the President and Congress.

Republicans cried foul, and their subsequent outcry led to President Obama removing now-Senator Elizabeth Warren from consideration as the CFPB’s first Director. When former Director Cordray was nominated in her place and at her urging congressional Republicans again spoke out against the Bureau’s structure.

When Republicans opposed former Director Cordray’s nomination, Democrats criticized opposition to their nominees as politically-motivated, waving off claims that the Bureau’s structure was fundamentally flawed. Now that President Trump has nominated Ms. Kraninger to helm the Bureau, however, the tables have turned, and Senator Warren is leading Democrats in protests of the nominee.

These very same Senators who turned a blind eye to the Bureau’s politicization under the Obama administration are now suddenly concerned about the Bureau’s independence under the Trump administration.

This game of political ping-pong infuses partisanship into an agency whose work should instead be guided by facts, data and rigorous research.

Congress mandated that the Bureau serve the needs of consumers when it created the agency, but the agency’s flawed leadership structure has only been led to political battles and to advancing a partisan agenda.

To remedy the structural flaws at the CFPB, Congress must change the leadership structure at the Bureau to avoid encountering the same issues and having the same partisan battles any time the CFPB or its actions come up for discussion.

Unlike similar agencies, the Bureau’s single-director structure puts unchecked power in the hands of one individual. Congress should transition the Bureau’s leadership structure to a bipartisan commission model similar to that of the Securities Exchange Commission (SEC) or the Federal Communications Commission (FCC). This would help foster a bipartisan environment among the Bureau and its staff, which currently are overwhelmingly Democratic, and lead to more thoughtful decision-making guided by data and research.

A bipartisan commission would allow members of both parties to provide input into the hierarchy of the Bureau and avoid the overtly political initiatives that the CFPB fostered under Director Cordray’s leadership.

Consumer protection is too important to leave in the hands of a single individual. A bipartisan commission would foster both independence and accountability at the CFPB and allow those in charge to focus on the mission of the Bureau rather than the political morass we continue to see.

Until the CFPB’s leadership structure is changed, partisan politics will continue to pervade all aspects of the Bureau and the agency will cease to fulfill its intended mission as a truly independent, non-partisan agency that serves American consumers.

Dennis Shaul is the chief executive of the Community Financial Services Association of America (CFSAA), a trade organization representing the small-dollar lending industry.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.