Congress needs to move faster on eliminating out-of-control and community growth killing CFPB

One of the priorities which has come up in the Trump Administration, in addition a myriad of topics has been to rein in the so-called Consumer Finance Protection Board (CFPB), the unholy child of Massachusets Senator Elizabeth Warren. Warren’s signature legislation has claimed to defend consumers, but in all actuality the CFPB has proven to be an unaccountable political fiefdom run amok outside of government, without oversight.

Thankfully, the CFPB has started to be examined and it’s power structure pilloried by the courts, and the court recognized the problems with the CFPB, declaring the bureau’s structure Unconstitutional.   Yet, even after the recent court decision against the agency, the CFPB still persists with wild abuses of power that directly affect the consumer, including their latest regulatory debacle going after pre-paid cards:

Yet self-initiated agency rules that are worse than the diseases they ostensibly cure continue to pour forth like water over Niagara Falls. An egregious example is the Consumer Finance Protection Bureau’s (CFPB) prescriptions for prepaid cards and accounts issued on October 5, 2016, pursuant to Regulation E, which implements the Electronic Fund Transfer Act; Regulation Z, which implements the Truth in Lending Act; and the official interpretations to those regulations.

Among other things, the regulation strangles in red tape ordinary prepaid cards, Google wallet, Pay Pal, payroll cards, student financial aid disbursement cards, tax refund cards, and certain federal, state, or local government cards used in the administration of unemployment insurance, family leave, or child support.

Read it here.

Even more important to South Dakota is how the CFPB has constricted small town banks from offering credit without mountains of red tape, as the burdensome regulation threatens to overwhelm a segment of the lending industry on which South Dakotans depend the most – the community lender.

As one community lender opined recently, CFPB regulations are killing community lending and replacing it with cookie cutter loans:

Community bankers know all too well the negative effect of the CFPB on local lending. The bureau has issued a bevy of one-size-fits-all regulations that fail to adequately distinguish between Main Street community banks and the Wall Street megabanks that policymakers intended to rein in after the crisis. These onerous rules have restricted mortgage lending at nearly three-quarters of community banks and replaced customized, relationship-based loans with cookie-cutter bureaucratic standards — none of which serves consumers. Meanwhile, the rising regulatory workload has exacerbated consolidation in the community banking industry, which has declined from more than 8,000 independent banks in 2010 to less than 5,900 today, leaving fewer communities with access to responsible financial services providers.

I have witnessed the impact of the CFPB right here in Tyler County, W.Va. Due to various CFPB regulations, the average third-party closing costs of a basic home mortgage loan in this area has more than doubled since 2008. Also, due to CFPB cookie-cutter definitions as to what constitutes a “qualified mortgage.” mortgages on land with attached single-wide mobile homes are difficult to obtain. These are just a few examples of the effects of regulatory over-reach.

The CFPB’s complex regulatory framework poses a tangible threat to the local communities that depend on community banks, which carry a disproportionate burden of any regulation because of their smaller size. Fortunately, reforming the CFPB is not as complex as the regulations it issues.

Read it all here.

Think about that – CFPB rules have restricted mortgage lending at nearly three-quarters of community banks. That trend hurts consumers, contractors, businesses who sell to both, and constricts the rate of community growth.

Who exactly is the CFPB trying to save? Bureaucrats? Because they aren’t helping consumers and they aren’t helping communities.

There is a glimmer of hope. South Dakota’s Senator Mike Rounds, who sits on the Senate Banking committee, brought legislation in February to address the concerns of the CFPB’s abuse of regulatory authority.  As noted by Rounds in a press release this past February..

 “A product of the ill-advised Dodd-Frank Reform Act, the CFPB is an unaccountable regulatory agency ran by unelected bureaucrats with no oversight from Congress,” said Rounds. “No unchecked federal agency should have the power to dramatically alter the financial choices of consumers through the rules it promulgates. Dismantling the CFPB is but one step we can take to ease the regulatory burdens of Dodd-Frank, the cost of which continues to be handed down to American families. I look forward to working with my colleagues to roll back the CFPB’s power and prevent the agency from imposing any further harmful regulations.”

Read that here.

Rounds’ legislation, officially known as “S.365 – A bill to amend the Consumer Financial Protection Act of 2010 to remove the funding cap relating to the transfer of funds from the Board of Governors of the Federal Reserve System to the Bureau of Consumer Financial Protection, and for other purposes” would roll back the CFPB’s authority upon passage.

Currently, the legislation has been read twice and referred to the Committee on Banking, Housing, and Urban Affairs, as it awaits its turn to be heard.  Unfortunately, while it waits, the CFPB churns out regulation after regulation, continuing to do damage to the financial industry. We can use relief now.

We’d like to see Congress move faster to rein in the out-of-control CFPB. For all our sake.