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From Banking and Finance Law Daily, April 22, 2015

‘Bipartisan’ CFPB bill at center of heated House debate

By Katalina M. Bianco, J.D.

The House began debate on April 21, 2015, on a bill that would require the director of the Consumer Financial Protection Bureau to establish a Community Bank Advisory Council, a Credit Union Advisory Council, and a Small Business Advisory Board to advise and consult with the CFPB. The measure, as written and passed by the House Financial Services Committee, was supported by both Democrats and Republicans, but a recent amendment by Committee Chair Jeb Hensarling (R-Texas) has sparked debate, and the bipartisan bill now has become a subject of controversy.

The measure, H.R. 1195, the Bureau of Consumer Financial Protection Advisory Boards Act, was first introduced in April 2014 in the 113th Congress. Representatives Robert Pittenger (R-NC) and Denny Heck (D-Wash) reintroduced the bill in March of this year, which passed the Committee by a vote of 53-5. The House approved H.R. 1195 by a vote of 235 to 183 on April 22, 2015. Following the House vote, Chairman Hensarling praised the legislation stating, “An agency as powerful as the CFPB will benefit from the advice of small businesses, community banks and credit unions. The CFPB should listen to them so it can issue smart regulations rather than dumb regulations that harm Main Street America.”

Controversy arises. The bill as amended would reduce the cap on the total amount of funding that could be requested by the bureau director for fiscal years 2020 and 2025. Detractors say the bill would provide for substantial cuts to the CFPB budget, affecting its ability to carry out its mission to protect consumers. Supporters say the cuts are not drastic and should not affect the CFPB’s work.

Waters speaks out. Representative Maxine Waters (D-Calif), Ranking Member of the Financial Services Committee, lashed out against Republicans for “yet another underhanded attempt” to undermine the CFPB. Waters said the “once bipartisan bill” was a “was a good and decent measure.” The lawmaker supported the bill as written but said the bill before the House now “is just the latest instance of Financial Services Committee Republicans snatching defeat from the jaws of victory.” She said the amendment means that the CFPB budget would be cut by about $45 million over the next five years and by $100 million over the next ten years, capping it at “substantially less” then the bureau currently is able to request.

The truth of the matter is that after several years of attempting to cap CFPB funding, the Republicans have chosen to transform Mr. Heck’s bill into a vehicle to make drastic cuts to the CFPB’s budget.”

Neugebauer supports bill. In remarks prepared for delivery, Rep. Randy Neugebauer (R-Texas), Chairman of the Financial Institutions and Consumer Credit Subcommittee, offered support for the bill. He said H.R. 1195 “is essential to provide small businesses a voice in the regulatory process, and to help ensure community banks and credit unions continue to have a voice at the CFPB going forward.”

The legislator noted that the Congressional Budget Office estimated that implementing H.R. 1195 would increase direct spending by $9 million over the next decade. “Republicans simply reduced the maximum amount that the CFPB can draw from the Federal Reserve over the same 10 years to offset this cost. To put this into perspective, the CFPB by statute can draw approximately $6.7 billion over this time period. The offset we are debating amounts to 0.1% of this amount.”

Neugebauer said that if that reduction “really threatens the Bureau’s mission, perhaps it is time to examine the Bureau’s current spending priorities. I am quite confident we can debate spending problems at the CFPB for the rest of the afternoon.”

Obama administration. The Obama administration issued a statement of policy on H.R. 1195 that makes its stance on the bill quite clear. As written, the administration does not oppose the bill. However, the administration said that it “strongly opposes” H.R. 1195 as recently amended by House passage because of the reduction in the cap on CFPB funding.

The statement referred to the CBO estimate that implementing the bill would increase direct spending by $9 million over the 2015-2025 period, meaning pay-as-you-go procedures would apply (see Banking and Finance Law Daily, April 7, 2015), but noted that the CBO also estimated that enacting the bill would not affect revenues or discretionary spending because the CFPB is permanently authorized to spend amounts transferred from the Federal Reserve System.

The administration referred to the amendment to lower the cap on funding is “problematic.” According to the administration’s statement, “As the CFPB's funding is already capped under law and only increased in line with increases in the Federal Government's employment cost index, this lower cap is solely intended to impede the CFPB's ability to carry out its mission of protecting consumers in the financial markets.” The administration said that the reductions “could result in, among other things, undermining critical protections for families from abusive and predatory financial products.”

The Obama administration also contended that the mandatory creation of additional advisory committees is not necessary because the CFPB already conducts significant stakeholder outreach. The CFPB already convenes a Community Bank Advisory Council and a Credit Union Advisory Council, the administration said. Further, the CFPB is the only financial regulator required to convene a panel prior to proposing a rule to obtain extensive feedback from small businesses on any rule that would significantly affect them.

Finally, the administration closed with a definitive remark as to its position on the bill. “If the President were presented with H.R. 1195 as currently amended, his senior advisors would recommend that he veto the bill.”

Kuster amendments. In addition to the Hensarling amendment, Ann Kuster (D-NH) offered an amendment that would require the CFPB director to include representatives of minority- and women-owned small business concerns in the membership of the Small Business Advisory Board, and to include financial institutions predominantly serving traditionally under-served communities and populations and their interests in the membership of the Credit Union Advisory Council and Community Bank Advisory Council. A second Kuster amendment would encourage the CFPB director to ensure the participation of veteran-owned small business concerns in the Small Business Advisory Board.

MainStory: TopStory CFPB

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