By a mostly party line vote, the U.S. House of Representatives late Thursday approved a Republican-backed bill that would substantially change the way the Consumer Financial Protection Bureau (CFPB) operates.
The Consumer Financial Freedom and Washington Accountability Act, sponsored by Rep. Sean Duffy, R-Wis., a member of the House Financial Services Committee, passed by a 232-182 vote.
All 222 Republicans in the House – along with 10 Democrats – voted for the bill, which would replace the CFPB's single director with a five-member board. It would also subject the regulator to the regular appropriations process and makes it a stand-alone independent agency, rather than a bureau within the Federal Reserve System.
Currently, there is no congressional oversight of the bureau's spending – although it does have a set budget.
The bill next moves on to the Democrat-controlled Senate, where it will likely be defeated. In addition the White House has already threatened to veto the bill, should it be passed.
Republican leaders, many of whom opposed the CFPB's formation under the Dodd-Frank Act in 2011, have expressed concerns that the bureau could overstep its bounds, in terms of regulatory oversight, and cause more harm to the mortgage market than good, as it seeks ways to protect consumers from predatory lending practices and mortgage servicer runarounds. They say the regulator not only needs its own oversight, it needs to be more transparent and accountable.
Some are concerned that the CFPB's new mortgage rules are overly aggressive and will have the affect of restricting credit to the point where millions of Americans no longer qualify for mortgages. Others fear the bureau is growing too fast and that its budget, which is set by the Federal Reserve and not Congress, is ballooning out of control.
The CFPB has endured a barrage of criticisms about its spending – according to a July 2013 report in the Washington Examiner, 54 CFPB employees have annual salaries that are higher than $200,000. What's more, it was recently revealed that the bureau is planning to spend $145 million on office renovations for a building it does not even own.
The proposed bill would set the salaries for CFPB employees in accordance with the General Services (GS) scale. It would also subject the bureau to the regular appropriations process and would make it a stand-alone independent agency, rather than a bureau within the Federal Reserve System.
The bill would also prohibit the CFPB from using consumers' personal financial information without their knowledge and consent. Recently the CFPB announced that it was expanding the information mortgage lenders are required to report under the Home Mortgage Disclosure Act (HMDA).
Most Democrats, however, argue that the CFPB has played a critical role in protecting consumers against deceptive lending practices, questionable debt collection practices and illegal fees – factors that led to the financial crisis that began in 2008.
During the House debate, Rep. Maxine Waters, D-Calif., the top Democrat on the Financial Services Committee, called the vote ‘just the latest chapter in a relentless Republican attack on consumer protection.’