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“Why a Commission for the CFPB May be in the Agency’s Best Interest”

Nov 19, 2015

A CFPB led by bipartisan commissioners could bring political and experiential diversity to the federal regulator, according to an op-ed in American Banker.

Opponents of restructuring the Consumer Financial Protection Bureau to be governed by a five-member, bipartisan commission should not dismiss the benefits it could have so quickly, according to an op-ed in American Banker by Brian Knight, associate director for financial policy at the Milken Institute Center for Financial Markets.

On Sept. 30, the House Financial Services Committee – of which U.S. Reps. Kyrsten Sinema (D-Ariz.) and Randy Neugebauer (R-Texas) are both members – passed the Financial Product Safety Commission Act of 2015 (H.R. 1266), which Neugebauer also sponsored. The bill would remove the CFPB from within the Federal Reserve System and re-establish it as a standalone agency governed by a five-member, bipartisan commission instead of one director, ACA reported. Then, in October, Sinema and Neugebauer wrote an op-ed together in The Wall Street Journal urging Congress to reform the CFPB by changing its leadership from one director to a bipartisan commission – a move ACA International has supported and lobbied for since March.

In his piece, Knight notes that some Democrats have largely opposed the bill passed by the House Financial Services Committee and addresses Warren’s continued support for the director leadership.

“While commissions may be less efficient than directorships, a properly structured commission could provide the benefits of broader expertise, continuity and democratic representation that are particularly valuable given the CFPB’s sweeping jurisdiction,” he writes.

A “properly structured commission” would not only provide political diversity but also diversity in the experience of its members.

“A commission can include leadership with diverse expertise and skill sets, helping the CFPB better regulate a broad and quickly evolving market,” according to Knight.

Knight also stresses that a commission to lead the CFPB can produce more continuity and stability.

“Given the breadth of the CFPB’s authority, and the controversy surrounding it, there is a real risk that the agency and market could be whipsawed by different administrations. Under a single-director model, what is to stop a new Republican or Democratic president, for example, from appointing a new agency head to roll back regulations written under [Director Richard] Cordray?

When the CFPB was created under the Dodd-Frank Act it was given broad autonomy to regulate financial products, creating rules with the force of law. While legislation can override the CFPB’s actions, the dynamics of Congress allow a minority to effectively block such a move. As such, given the expansive delegation of authority the CFPB has, it is important that voices from across the spectrum at least have a formal seat at the table, even if their views ultimately do not carry the day.”

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