A new bill aims to dismantle the powers of the Consumer Financial Protection Bureau, the independent watchdog that protects consumers and investors and has saved Americans almost $12 billion since it was created six years ago.
Supporters say the Financial CHOICE Act will undo the regulatory burdens that have harmed financial service companies and provide Congress with much-needed oversight. But consumer advocates insist the bill would eliminate the CFPB's independence and greatly reduce its ability to regulate.
Republicans in Congress are focused on eliminating regulations — including many put in place by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act following the financial crisis that peaked in 2008. The Financial CHOICE Act, which passed the House Financial Services Committee on a 34-26 party line vote last week, is the first attempt to do that.
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The CHOICE Act would do more than reduce financial regulations enacted under the Obama administration. It also targets the CFPB, the regulatory agency created by Dodd-Frank to police the financial marketplace.
Among other things, the bill would:
- Strip away the agency's authority to regulate large banks and payday lenders
- Remove its power to prosecute companies that engage in unfair, deceptive or abusive acts or practices
- Eliminate independent funding from the Federal Reserve Bank and give Congress the power to set the CFPB's budget
- Allow Congress to kill any major financial rules proposed by the agency; both houses would have to give their approval within 60 days
- Stop public access to the CFPB's database of more than 1.1 million consumer complaints.
Consumer advocates argue that the bill would cripple the CFPB's ability to protect consumers and give special interest groups a way to influence regulation of the financial system through the congressional appropriations and approval process.
"The bill neuters the CFPB and would leave consumers more vulnerable to financial scams, hidden fees and costly gotchas that can undermine their financial security," said Pamela Banks, senior policy counsel for Consumers Union (CU), the policy arm of Consumer Reports. CU has launched a petition campaign to kill the bill.
However, the American Bankers Association, a longtime critic of the CFPB, told the committee in a letter the bill would "bring some clarity to the agency's mission and operations."