Paper Finds Bipartisan Agreement on Newly Created Agency

Today, BPC’s Financial Regulatory Reform Initiative (FRRI) released the first comprehensive bipartisan analysis of the newly created Consumer Financial Protection Bureau’s actions to date (CFPB). The Consumer Financial Protection Bureau: Measuring the Progress of a New Agency, was written by the co-chairs of the FRRI’s Consumer Protection Task Force: Rick Fischer and Eric Rodriguez. The paper looks at where CFPB has made progress as well as considering areas in which the Bureau could improve. The paper includes over 30 recommendations on how to improve operations of the CFPB.

The BPC hosted the release of this paper in an event moderated by FRRI Co-Chair Martin Baily. The paper is the second in a series of five white papers being produced by the Initiative. The paper contained the following key findings from the Task Force, summarized below.

The Task Force found several overarching trends or patterns, which emerged when considering both successful and problematic actions taken by the Bureau. Perhaps the most significant trend the Task Force discovered was that when the Bureau operated in a transparent, open, and iterative manner, repeatedly seeking input from all stakeholders throughout a process, the results were generally positive. However, when the Bureau made unilateral decisions, rolled out initiatives, rules, or processes as a result of a more closed, internal deliberation process, the results were far more likely to be problematic. Sometimes the Bureau went back, sought input, and improved the end result. Sometimes it did not.

The Task Force concluded that the Bureau has done a very good job setting up a brand new agency from the ground up, which is no easy task. Additionally, the Bureau may be the only regulator given major new power under Dodd-Frank that has met its statutory deadlines. That said, there are many areas in which the Bureau could improve its process, which is to be expected for a new agency. The report provided a series of recommendations to that end.

The Task Force recommends that the Bureau adopt an official policy establishing timelines for formally closing out examinations of both banks and nonbanks. The Task Force recommends that the CFPB make every effort to provide prompt feedback to entities the CFPB examines and to close these examinations in a timely manner.

Given the significant downside to any data breach, the Task Force recommends that the Bureau take every step possible to ensure that no breach of data occurs. This extends both to data that the Bureau collects directly, as well as to all data collected and used by outside vendors. Further, the Task Force recommended that the Bureau require coordination among its various divisions when requesting data from any institution. The Task Force also recommends that the Bureau require that a statement of intended use be given with a data request.

The CFPB’s management and leadership should focus substantial time and energy on improving official communications with covered entities and partner regulatory agencies about their exam process. The CFPB should commit to launching a new major initiative to recruit, train, retain, and further develop high-quality supervisory and examination staff.

The Bureau should rethink policy decisions to involve enforcement staff in supervisory processes. The Task Force believes that any organizational benefits envisioned from that policy are outweighed by the more visible drawback of creating a barrier to forthright communication.

The CFPB should better categorize consumer complaints received and published to benefit both consumers and the marketplace as a whole. The Task Force recommends two categories: (1) complaints that have received no review, marked with a clear disclaimer that the CFPB has not reviewed the accuracy of those complaints, and (2) complaints that have been sufficiently reviewed by either the Bureau or regulated entities to ensure accuracy prior to publication.

The Task Force has significant concerns about the unique civil penalty fund that the Bureau controls. There are a number of ways that these concerns could be remedied. One is by limiting the Fund to only dispensing amounts necessary and appropriate for consumer redress, with any additional civil money penalties paid to the U.S. Treasury. Alternatively, if funds in excess of redress are to be retained and used by the CFPB, the Bureau should more clearly delineate how such funds are to be used to advance consumer education.

The Task Force recommends that the Bureau restart its efforts to utilize Civil Penalty Fund resources to support a new financial services coaching program, beginning with consultation and collaboration with external stakeholders to help define the goals and scope of the effort. The Task Force is concerned that the program may not have the desired meaningful impact without collaboration on the project’s design and implementation from key stakeholders including other federal agencies, industry participants and consumer groups that regularly work with veterans and economically underserved consumers.

It is not often that the nation witnesses the creation of a new federal agency, especially one that can impact the lives of all Americans. Therefore, it is the Task Force’s hope that the findings and recommendations made in this paper can serve as a guide to the leadership of the CFPB and other stakeholders in consumer protection—including consumer groups, industry representatives, and other regulators. Regardless of whether one supported the creation of the Bureau or not, everyone should want it to function as well as possible.

Taken together, these and the other recommendations in the report will help the CFPB fulfill its responsibilities in a way that best serves the Bureau, regulated entities, and most importantly, consumers.