House Passes Financial Reform Bill that Remakes Consumer Bureau

The Republican-controlled House on Thursday passed a comprehensive bill to undo much of the 2010 Dodd-Frank Financial Reform act, including restructuring the Consumer Financial Protection Bureau in the name of accountability to Congress.

The largely party-line vote for the Financial Choice Act (H.R. 10) was 233-186.

Long in the works by House Financial Services Committee Chairman Rep. Jeb Hensarling, R-Texas, the bill is described as a means to end the “too big to fail” protections for large banks and allow more capital to flow to community banks and small businesses.

But it also takes aim at the long-controversial Consumer Financial Protection Bureau, which a committee summary called “not accountable to Congress or the American people.” According to the committee, the bureau’s policies often harm consumers or exceed its legal authority because the bureau is not subject to checks and balances that apply to other regulatory agencies. "The bureau symbolizes a paternalistic approach to consumer protection that empowers bureaucrats while denying consumers access to financial products and services they want and need.”

And, Hensarling’s summary continued, “the bureau is harming consumers by operating a 'consumer complaint database' designed to catalogue and publicize consumer complaints against companies without first verifying their veracity.”

Hence the bill will alter the independent agency’s governance and funding mechanism so that it receives an annual appropriation from Congress rather than taking funding from the Federal Reserve to shield it from what creators saw as political interference. And it would give the president new authority to fire the director, who currently serves a five-year term and can be removed only “for cause.”

The bill’s prospects in the Senate are considered up in the air.

Rep. Nydia M. Velázquez, D-N.Y., who serves on Hensarling’s committee, said on the House floor, “My colleagues seem to suffer from a case of policymaking amnesia. I was here in 2008 as our nation stood on the edge of financial ruin. Thanks to Wall Street making reckless bets and inadequate government oversight, millions of Americans lost their homes and jobs.” She argued that “Dodd-Frank has improved accountability in the financial system. It has protected consumers and investors from predatory practices. It has stabilized our markets.”

Restructuring the consumer bureau “cripples the CFPB’s ability to stand up to the big banks and predatory lenders and puts hardworking families at risk of losing their money to unfair financial practices,” Pamela Banks, senior counsel for the Consumers Union, said in a statement. “We need a strong financial watchdog to protect our wallets from hidden fees and abusive lending practices.  The Senate should reject this rollback of critical consumer protections.”

Bartlett Naylor, financial policy advocate for Public Citizen’s Congress Watch division, said the legislation would  “shackle the newly created U.S. Consumer Financial Protection Bureau, designed to combat predatory lenders who tempted borrowers with mortgages they couldn’t afford, a practice so widespread it led to the 2008 financial crash.”