Bank lobby presses for commission to lead consumer watchdog agency

WASHINGTON (Reuters) - Bank lobbying groups are pressing the U.S. Senate to once again work on reforming the country's consumer financial watchdog agency - but this time around they may see those changes become reality.

In a letter to Senate leaders released on Wednesday the groups, including the Consumer Bankers Association and the Credit Union National Association, called for legislation to change the leadership of the Consumer Financial Protection Bureau from a single director to a five-member commission, which they say would make the agency more accountable.

They also asked Congress to void the CFPB's recent rule on prepaid cards and halt work on regulations for mandatory arbitration, payday lending, and third-party debt collection using a law known as the Congressional Review Act.

The CFPB's sole director has "unprecedented authority over financial institutions, with minimal oversight," they wrote in the letter, which was also signed by the Independent Community Bankers of America and the National Association of Federal Credit Unions.

The director's power to both create regulations and carry out enforcements, including levying million-dollar fines, can "have sweeping and longlasting effects," the groups wrote.

Many have supported commission leadership since the CFPB was first created in the 2010 Dodd-Frank Wall Street reform law to protect everyday consumers from bad actors in the areas of mortgages, student loans, credit cards and banks. Recently, the CFPB and other agencies fined Wells Fargo & Co $185 million for creating fake accounts.

Republicans drafted the first Senate bill to change the CFPB, currently headed by Richard Cordray, in 2012 and then introduced similar legislation in the following three years. In the House of Representatives, the Financial Services Committee recently approved a sweeping bill to also create a commission to run the agency.

Democratic President Barack Obama has stood in the way of establishing a commission with his veto pen. President-elect Donald Trump, a Republican, is expected to support changes.

The single-director structure allows the CFPB to move quickly and eliminates the risk of protracted fights among commission members, proponents say.

A three-judge panel in the U.S. Court of Appeals for the District of Columbia recently agreed the director has too much power, although it ruled that could be remedied by allowing the president to fire the director without cause.

The government petitioned the entire court for a review of the decision.

The court has signaled it will vote on the petition before Trump's Jan. 20 inauguration, and many expect it will go ahead with the review.

In an unusual step revealing the case's importance, it asked the solicitor general to file a separate brief. Lawyers say the separate brief may be a form of due diligence, showing the court has heard all sides. Or, it could be a way to "lock in" the current administration's opinion to create consistency with the next one. The solicitor general under Trump would represent the CFPB if the case goes to the Supreme Court.

(Reporting by Lisa Lambert; Editing by Jonathan Oatis)