CFPB Faulted On White House Ties And Opaque Enforcement Language

The Consumer Financial Protection Bureau (CFPB) is the subject of two separate attacks: one relating to its working relationship with the Obama administration, and the other questioning its approach to investigating alleged abuses by financial institutions.

The Wall Street Journal reports that Rep. Patrick McHenry, R-N.C., sent a letter to CFPB Director Richard Cordray (pictured left) requesting that the CFPB provide details on how its senior officials interact with the Obama administration. McHenry's request follows news reports of CFPB officers working in tandem with the White House on policy formulation – including Cordray's presence at a White House press briefing last month on student loans and his attendance at a recent White House Cabinet Affairs Chief of Staff Lunch – rather than operating as an independent regulatory entity.

‘Although employees of other independent agencies meet with White House staff members and such meetings are not per se inappropriate, the frequency of the CFPB's visits and the CFPB's coordinated public events with the White House could suggest that the bureau's regulatory actions are indirectly shaped by these interactions,’ McHenry wrote.

Separately, the CFPB came under fire for being too vague in defining potential violations of financial regulatory laws. David Hirschmann, president and CEO of the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness, sent a letter to Cordray that faulted the agency with a severe lack of clarity in the language of its enforcement parameters. He called on the CFPB to issue a policy statement defining ‘abusive’ conduct in relation to the consumer financial market, and he questioned whether the agency was creating more problems than solutions through its current operational practices.

‘You have said on a number of occasions that legitimate businesses have nothing to fear from the CFPB, provided they play by the rules,’ Hirschmann wrote. "Our concern, however, is that in many cases, those rules remain ambiguous because terms are undefined, and the regulatory and supervisory processes are overlapping and inconsistent.

‘In many ways, the creation of the CFPB, with its broad responsibility for overseeing supervision, regulation and enforcement of existing consumer financial protection laws, and the implementation of new federal standards, has made it more, rather than less, difficult for companies to know what is expected of them,’ Hirschmann added. ‘And while a measure of uncertainty is unavoidable under these circumstances, the CFPB can do more to help honest companies navigate this difficult 'start up' phase of the CFPB's work without compromising its ability to protect consumers from fraud.’

Hirschmann also accused the CFPB of creating ill will through the inclusion of enforcement personnel in the agency's examination teams, saying their presence ‘transforms the examination process from the cooperative exchange of information that has been the hallmark of federal bank examinations into an adversarial process overseen by lawyers on both sides that inevitably will be less informative and less productive in terms of promoting candid consultations that will enhance compliance.’

Furthermore, Hirschmann questioned the CFPB's recent bulletin stating that companies can be held liable for the actions of their service providers, arguing that the agency failed to explain ‘the standard governing this sort of vicarious liability.’


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