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From Banking and Finance Law Daily, March 23, 2015

Senate 2016 budget adds amendments to end CFPB funding independence, Operation Choke Point

By Colleen M. Svelnis, J.D.

In the mark-up for the Senate’s 2016 Budget Resolution, the Senate Budget Committee has approved an amendment to end the independent funding of the Consumer Financial Protection Bureau, bringing it under the congressional appropriations process instead. Since its creation under the Dodd-Frank Act, the CFPB has been funded directly by the Federal Reserve Board. Another amendment would end the controversial Department of Justice program known as Operation Choke Point.

Choke point. Sen. Mike Crapo (R-Idaho) proposed the amendment that would establish a deficit-neutral reserve fund to end Operation Choke Point. It was approved on a 13-9 vote. “Rather than targeting bad actors for illegal activity, this effort, known as Operation Choke Point, is causing banks to deny or terminate credit lines due to fear of DOJ subpoenas or unjustified regulatory action by federal banking regulators,” said Crapo (see Banking and Finance Law Daily, May 30, 2014).

In a letter sent to Attorney General Eric Holder, Crapo, along with 5 other senators, expressed their concerns with Operation Choke Point and its impact on merchants, financial institutions, and consumers. The senators claim that the operation is causing banks and payment processors to deny loans and restrict access to payment systems for legitimate businesses to avoid unwarranted investigations and legal actions by the DOJ and federal banking regulators. They requested that the DOJ revise its implementation of the operation.

CFPB funding. Sen. David Perdue (R-Ga.) proposed the amendment which would put the agency under congressional oversight for the first time. Currently, the CFPB operates under the Federal Reserve Board. According to Perdue, the Dodd-Frank Act established the CFPB’s budget at as much as 12 percent of the Fed’s annual operating expense (see Banking and Finance Law Daily, Dec. 31, 2014).

“Right now, the CFPB is a rogue agency that dishes out malicious financial policy and creates new rules and regulations without any oversight from Congress. On top of that, the agency itself has failed to operate within its own budget and proven it is more concerned with preserving its own power than protecting the public,” said Perdue. “Ultimately, I believe the CFPB should be dismantled, but an important first step is bringing it into the light for the American people to see its harmful effects on consumers.”

AFR reaction. Americans for Financial Reform (AFR) denounced the move to strip the CFPB of its independent funding, saying “it would cripple the first and only financial regulator with a mandate to put consumers’ interests first.” AFR released a statement saying the Senate Budget Committee was “acting on behalf of Wall Street banks and predatory lenders who opposed the CFPB’s creation and have fought it since, precisely because they do not want it to succeed.”

Companies: Americans for Financial Reform

MainStory: TopStory CFPB DoddFrankAct PrudentialRegulation FederalReserveSystem

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