Dr. Boozman's Check-up

This week, the second-most powerful court in the country delivered a harsh rebuke to the Obama administration when it ruled that the Consumer Financial Protection Bureau (CFPB) had been organized and structured in an unconstitutional manner. 

The CFPB was created by the Dodd-Frank legislation passed by the Democrat-controlled Congress and signed into law by President Obama in the wake of the financial crisis that began in 2008. While there was clearly a need to reform parts of the financial services industry, the CFPB and other executive agencies have issued heavy-handed regulations that have harmed community banks and hindered economic growth.

The CFPB has been fraught with problems since its inception. Its structure is unconstitutional because it was established as an independent agency with an unaccountable director who is appointed by the President to a five-year term and can only be fired “with cause.” This is in contrast to most other independent agencies which have multi-member boards with a bipartisan makeup. The lack of accountability at the CFPB is troubling. This agency makes rules and regulations that impact the lives of millions of Americans.

Judge Brett Kavanaugh wrote in his opinion that “The CFPB is the first of its kind and a historical anomaly…when measured in terms of unilateral power, the Director of the CFPB is the single most powerful official in the entire U.S. Government, other than the President. Indeed, within his jurisdiction, the Director of the CFPB can be considered even more powerful than the President.”

While the court did not order the CFPB disbanded, its ruling does curb the agency’s power and also rebukes it for an enforcement action it recently took against a mortgage lender. This is a major win for small businesses and community banks and, if the decision is upheld by the Supreme Court, will bring more oversight to the actions of the CFPB. A future president would be able to remove the CFPB director at any time, an important tool for reining in federal agencies that abuse their regulatory powers.

The CFPB has been issuing regulations that are preventing small community banks from providing the support and services necessary for small businesses to effectively operate, create jobs and stimulate economic growth. As the chairman of the Appropriations Committee’s Subcommittee on Financial Services and General Government, I have met personally with Director Richard Cordray to stress the need to provide our community banks with flexibility, as Dodd-Frank’s one-size-fits-all approach to regulating our banks is not the answer, and to express concern with the CFPB’s data collection and security practices.

I welcome this decision from the D.C. Circuit Court and hope it is upheld should it be heard before the Supreme Court. I look forward to continuing to work with my colleagues to reform the CFPB so that the agency is accountable to Congress and the American people.