Op-Ed: CFPB overhaul needs to include a look at past regulations
CFPB OVERHAUL NEEDS TO INCLUDE A LOOK AT PAST REGULATIONS
By: Commissioner Trent Hatley
For those who followed abuses by the Consumer Financial Protection Bureau (CFPB) under President Joe Biden, the first few weeks of the second Trump Administration have been a revelation. From President Trump’s day one decision to freeze rulemaking, to the recent decision to replace Biden-era CFPB director Rohit Chopra, President Trump has lived up to his title as a pro-business and pro-deregulation leader.
But now, as the Administration and Congress consider next steps for the CFPB, it’s important that they prioritize a review and repeal of the lame duck actions undertaken by Chopra. Too many rules and actions remain on the books that are holding our economy and small businesses back.
At its core, the CFPB was created to regulate the financial industry, help provide consumers with financial literacy, and act as a resource for consumers in instances where they were defrauded. But under Biden, these priorities fell by the wayside entirely in favor of a partisan agenda more focused on punishing businesses than helping consumers.
The CFPB’s partisan agenda became even more apparent in the waning days of Biden’s term. Following President Trump’s election, the CFPB went into overdrive to try and cement a series of partisan policies it knew President Trump would never support. The agency rushed to implement new rules, filed new lawsuits, and launched new enforcement actions.
The pace of the CFPB’s actions following the election was alarming, the overall actions were nothing new. The CFPB routinely overreached under Biden and unilaterally advanced a left-wing agenda.
Two behaviours were especially troubling.
First, the CFPB regulated areas that they were never given the authority to address. Over the last four years, they sought to regulate digital wallets, peer-to-peer payment apps, medical debt reporting, and bank overdraft fees among other things.
The common thread on these actions? Congress, neither in the creation of CFPB nor through subsequent legislation, gave the CFPB the power to regulate these issue areas. Worse, it was never their intention that the agency would.
Second, the CFPB pursued an aggressive strategy of regulation by enforcement. For most agencies, creating new regulations requires going through the federal government’s formal rulemaking process. The CFPB, however, didn’t view that process as a necessity.
Instead, it opted to create regulations out of thin air and thrusted those regulations on financial institutions that didn’t even know the rules applied. The CFPB was effectively rewriting the rulebook in the middle of a game.
What that meant was extreme uncertainty for financial institutions. On a day-to-day basis, they were dealing not just with CFPB’s overregulation into new issue areas, but the threat of new enforcement actions that they would have had no way of preparing for.
As financial institutions faced uncertainty, the impact trickled down to consumers and small businesses. Financial institutions facing uncertain regulatory environments are less likely to offer new services, expand, or provide access to lines of credit.
The actions of the CFPB over the last four years deserve scrutiny. Thankfully, President Trump has already taken steps to reign in the agency, but there’s still work that needs to be done.
The midnight-rulemaking done under the last Administration is still on the books, and until that is reviewed and overreach repealed, consumers and small businesses continue to be in harm’s way. To unlock the full potential of America, it’s imperative that this is changed.
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