12 Steps to Better Consumer Financial Regulation
Subscribe today for Free Enterprise Updates
- Latest business trends and best practices
- News about legislation and regulation impacting business
- Business how-to articles from industry experts
- Commentary and interviews with newsmakers in business and politics
This month, the Consumer Financial Protection Bureau (CFPB) turns one year old. Any organization of that age will experience moments of stumbling around as it tries to align its processes with its mission and goals. But as the CFPB reaches the toddler stage, it’s clear that its development has been stunted. While the agency has taken a few helpful steps to alleviate uncertainty in the business community, a number of other actions have exacerbated it.
David Hirschmann, president and CEO of the U.S. Chamber’s Center for Capital Markets Competitiveness, wrote a letter to CFPB Director Richard Cordray, recommending 12 concrete steps that the CFPB should take to improve its supervision and regulatory processes. We summarize them here:
1. Define “Abusive”
The CFPB should issue, following an opportunity for public input, a policy statement defining the conduct that constitutes an “abusive” act or practice in the consumer financial market. This is particularly important because each state attorneys general and regulators can bring enforcement actions based on the “abusive” standard.
2. Explain Liability
If the CFPB intended to create a new liability, then it should propose and finalize a regulation with public input to establish clear guidelines delineating the circumstances in which companies can be held liable for the acts of their service providers. If the CFPB did not intend to create a new liability standard, then that should be clearly communicated to the public.
3. Improve the Supervision Program
The CFPB should take steps to ensure an open, efficient, coordinated supervision program. These steps include an open exchange of information between the CFPB and the companies it supervises, without the presence of enforcement attorneys, and clear and specific disclosure and confidentiality standards.
4. Fix the Process for Publishing Company-Specific Complaint Information
The CFPB should halt the practice of publishing company-specific complaint information until a few fundamental changes are made to the database to ensure that the government is not disseminating misleading information. The Bureau should take stronger steps to verify complaints of all kinds and publish only company-specific figures related to the resolution of complaints. This will help to ensure that the underlying complaint is valid and that the information is actually useful to consumers.
5. Implement Sound Cost-Benefit Analyses
The CFPB should sign a memorandum of understanding with the White House Office of Information and Regulatory Affairs to ensure that its cost-benefit analyses are rigorous and complete.
6. Improve and Consistently Apply Small Business Impact Provisions of Dodd Frank
The CFPB should take a number of steps to better comply with requirements to consult and mitigate small business impact as part of the rulemaking process, including regularly convening small business panels and publishing panel reports when they are completed, rather than waiting to release them as part of a proposed rule.
7. Improve Regulatory Review
The CFPB should develop formal plans for retrospective review of Dodd-Frank rules and take steps to ensure that the Office of Management and Budget’s regulatory guidance is followed carefully.
8. Improve Coordination with the FTC
The CFPB should provide an update on the implementation of a memorandum of understanding with the Federal Trade Commission and engage stakeholders to help assess the agencies’ effectiveness in preventing duplication and conflicts between the regulators. The Bureau should develop recommendations for drawing a brighter line between the responsibilities of the two agencies.
9. Ensure the Arbitration Study is Comprehensive
The CFPB should make clear that its study will look at pre-dispute arbitration in comparison to the alternative—litigation.
10. Update Interim final Rules (IFR):
The CFPB should make clear whether it intends to make changes to IFRs based on public comments it sought. The CFPB has published a number of IFRs as a means of preventing the delay of certain activities. However, it has asked for comment as part of those IFRs and some rules have not been updated. This makes it difficult to know if the rules are truly final, and whether the Bureau read and considered public comments.
11. Publish more Organizational Information on your Website
The Bureau should be taking practical steps to facilitate compliance with inherited regulations (i.e., publishing a staff directory or other information that identifies the person or persons responsible for each relevant subject-matter area, statute, or regulation; improving access to regulatory information on the Bureau’s website). These measures would require few resources and would help facilitate compliance with the existing regulations.
12. Publish and Update a Market-Based Regulatory Schedule
The CFPB should publish and periodically update a schedule of proposed and final rules by market.
Congress created the CFPB to get rid of fraud in the marketplace, not to bog down the consumer financial product and service market with red tape and uncertainty that will make an already lean credit market unworkable. The Bureau has shown that it can be sensitive to reasonable concerns about regulatory uncertainty and inefficiency. By taking these additional steps, the CFPB will make clear its commitment to transparent, efficient supervision and regulation, and give honest businesses clear, consistent standards so they can continue to help consumers and small businesses access the credit they need.