With the Senate controlled by Democrats, the Consumer Financial Protection Bureau may be safe from major legislative meddling for the time being, but House Republicans showed once again this week that they are dedicated to keeping the agency in as much of a defensive crouch as possible.
By a vote of 232-182 on Thursday, with no Republicans in opposition and 10 Democrats in support, the House passed a package of proposals that would replace the director of the CFPB with a bipartisan five-person board, change the way it is funded so that Congress has tighter control over its purse strings, and give the Financial Stability Oversight Commission authority to overturn its decisions.
The absolute disdain of House Republicans for the new agency, created as part of the 2010 Dodd-Frank reform law to keep consumers from being ripped off by financial services firms, was evident in the floor speeches delivered before the vote.
“Mr. Chairman, somebody has to protect consumers from the CFPB,” said Rep. Jeb Hensarling (R-TX). “Consumers, yes, they have to be protected from Wall Street, but they have to be protected from Washington as well. You do not protect consumers by having unelected, unaccountable bureaucrats in Washington whose average salary is over $175,000 — salary and benefits — to somehow say: I am from Washington. I am smarter than you. I will decide whether or not you get a mortgage. It is arrogant; it is unfair; it is abusive. It must stop.”
Hensarling’s particular concern was the agency’s rule on “qualified mortgages,” which will make it more difficult for lenders to offer the kinds of loans that suffered high rates of default during the financial crisis. Hensarling argued that the CFPB’s rules, requiring banks to make sure that borrowers are able to afford a loan before they make it, will reduce the availability of credit to some borrowers.
This, of course, was the point of the rule in the first pace. Many people who defaulted on their loans during the crisis should never have been given loans at all. But Hensarling believes that the rule will adversely affect more people than CFPB has said it will.
While the bill that passed the House isn’t likely to become law, close observers said that it was meant to put the CFPB on notice that it isn’t out of legislators’ crosshairs. “I suspect the Republicans’ view is the CFPB has turned out to be the nightmare they predicted it would be,” said attorney Gilbert T. Schwartz, a former Federal Reserve Board attorney who represents financial institutions. “They likely intend the legislation as a message to the CFPB to temper its activist ways.”
Consumer advocates, who lined up in impressive numbers to support the agency and register their opposition to the bill, were, unsurprisingly, unhappy with the House vote. “Despite the CFPB’s growing number of important actions to protect financial consumers and make markets work, some House members, backed by special interests who agree with them, prevailed on legislation designed to gut the CFPB,” said Edmund Mierzwinski, consumer program director for the U.S. Public Interest Research Group.
“Fortunately, the Senate and the president agree with a majority of the American people that the idea of the CFPB needs no defense, only more defenders,” Mierzwinski said.
One place the agency is not likely to find enough defenders is on the House Financial Services Committee, which Rep. Hensarling chairs. While he may not be able to completely hamstring the agency right now, Hensarling can — and likely will — force the CFPB’s leadership to spend a lot of time in contentious oversight hearings over the next several months, all the while hoping to see the GOP take over the Senate in the November elections.
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