News

Bipartisan Policy Center releases report on CFPB ops

September 26, 2013

A report issued this week by the Bipartisan Policy Center's Financial Regulatory Reform Initiative offers several recommendations for the Consumer Financial Protection Bureau and Congress to improve the state of consumer protection, increase the efficiency of the financial services industry and improve the quality of regulation.

"The Consumer Protection Bureau: Measuring the Progress of a New Agency" concludes that when the bureau operates in a transparent, open, and iterative manner, repeatedly seeking input from all stakeholders throughout a process, the results were generally positive, a news release from BPC said. 

However, when the bureau made unilateral decisions, and rolled out initiatives, rules, or processes through a more closed, internal deliberation process, the results were far more likely to be problematic, the BPC report said:

In addition to the concern about inadequate notice of public hearings, others have suggested that the CFPB should provide the public with additional opportunities to participate in its meetings. As an example, one day after its June 6, 2013, forum — titled "Life of a Debt: Data Integrity in Debt Collection" — the CFPB held an ostensibly public follow-up meeting. The meeting, however, was open only to those consumer groups, industry members, and government officials who received a personal invitation from the CFPB ...

By excluding the public from such meetings, and by providing inadequate notice for other hearings, the CFPB has limited the ability of both consumer groups and industry members to participate in the policymaking process.

Similarly, criticism has been expressed about the selective manner in which the CFPB releases its regulations and guidance. Specifically, we have heard of examples of select members of the media being provided copies of final regulations and guidance, on an embargoed basis, well in advance of distribution to consumer groups and other market participants. While this practice by itself may not ultimately change how consumer groups and covered entities respond to new regulations, it suggests a lack of even-handedness that is inconsistent with the CFPB's stated goal of full transparency.

Properly functioning financial markets require input from all stakeholders, and the CFPB should not, whether in appearance or practice, grant preferential access to one group at the exclusion of another. The CFPB can easily demonstrate its commitment to transparency by emulating the transparency practices of other federal agencies.

Rick Fischer of Morrison & Foerster and Eric Rodriguez of the National Council of La Raza, co-chairs of the initiative's Consumer Protection Task Force, authored the report, which reviews the performance of the bureau since it was created three years ago. It is the first bipartisan examination of the CFPB's operations and effectiveness.

Throughout the nearly year-long review, the initiative met with the CFPB, leading consumer advocates, federal and state bank regulators, and regulated industry participants in the bank and nonbank space.

According to the release, the report also highlights the need for the bureau to improve security for the data it collects and better coordinate its request for data in a fashion consistent with its supervisory and examination needs. And, the report warns that the bureau's goal of occupying a trusted place among consumers could be significantly harmed if they were to experience a data breach.

"The bureau has done an admirable job in standing up a new agency in such a short time period of time," said Fischer. "Nevertheless, although the bureau's product-line focus to examinations may prove to be a useful way to review consumer products and services over time, the agency has had problems implementing this process. The bureau's supervision and examination functions would be strengthened if it more promptly closed out exams, ended the use of enforcement lawyers in examinations, and improved coordination with fellow regulators."

The full report is available at the BPC website for free download.

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