House bill would curb CFPB authority, replace Cordray

by Ryan Smith02 Jun 2016
A new appropriations bill approved by a House subcommittee includes provisions that would curb the authority of the Consumer Financial Protection Bureau.

The fiscal year 2017 appropriations bill was approved by the House Financial Services and General Government Appropriations Subcommittee of the House Appropriations Committee, according to a report from CFPB Monitor. It includes two changes to the CFPB’s structure long sought by congressional Republicans.

One provision would change the agency’s funding structure so that it would be funded through the annual congressional appropriations process rather than through transfers from the Federal Reserve. Should the bill pass, if the CFPB requests funds from the Fed, it must notify Congress – and include in the notification the amount requested, an explanation of how the funds will be used and a statement about why the funds are necessary to protect consumers, according to CFPB Monitor. The bill would also require the agency to provide a report on its performance at the end of each quarter.

Another provision would change the CFPB’s leadership structure from its current organization with a single director heading the agency to a five-member board of directors appointed by the president. Lawmakers have long objected to the breadth of CFPB Director Richard Cordray’s authority, saying the agency’s current structure puts too much power in the hands of one person.

The bill also includes a provision meant to undercut the agency’s recent attempt to limit binding arbitration clauses, according to CFPB Monitor. The provision states that none of the CFPB’s funding “may be used to regulate pre-dispute arbitration agreements.” The bill would require the CFPB to study the use of arbitration agreements prior to issuing rules regarding them, and any rule issued by the agency regarding the agreements would “have no legal force” until that requirement was fulfilled.