July 21, 2016

Chairman Richard Shelby

U.S. Senate Committee on Banking,
Housing, and Urban Affairs
534 Dirksen Senate Office Building
Washington, D.C. 20510

Ranking Member Sherrod Brown

U.S. Senate Committee on Banking,
Housing, and Urban Affairs
534 Dirksen Senate Office Building
Washington, DC 20510

Re: 5th Anniversary of the Consumer Financial Protection Bureau

Five years ago today, the Consumer Financial Protection Bureau (CFPB) opened for
business. The agencys mission, to guard consumers from deceptive practices of
financial organizations and businesses, is imperative. Too often, however, the agency
seeks to achieve its laudable ends through counterproductive means that place undue
restrictions on consumer choice. The agency is also shielded from accountability and
oversighta structure that threatens both the CFPBs legitimacy and effectiveness.
On this fifth anniversary, Consumers Research writes to express its concern over the
CFPBs power and policies, and to recommend to Congress concrete reforms it should
implement that will make the agency responsive to consumers needs in a more
transparent and accountable manner. Three reforms are outlined below:
1. The agencys authority to regulate automotive loans must be rescinded. This is
not to suggest that the auto-loan industry should be free of oversight; rather, the
Federal Trade Commission is already doing this job effectively, actively
prosecuting auto lenders for deceptive and illegal lending practices. Using the
additional authority of Dodd-Frank and the CFPB to oversee the industry would
prohibit many subprime borrowers from obtaining the financing they need to
purchase an automobile. The House passed a bill nullifying CFPBs auto-lending
guidelines last year; the Senate should pass S. 2663, which would do the same.
2. To regulate payday and alternative lenders most effectively, Congress should
insist that the CFPB not impose standards that harm consumers who do not
qualify for conventional loans. Last year, Floridas Democratic congressional
representatives urged Director Cordray to follow their states approach, which
has proven to encourage lending practices that are fair and transparent without
restricting credit options. Doing otherwise would be an immeasurable
disservice to our constituents, many of whom rely on the availability of shortterm and small dollar loans from regulated, licensed non-bank lenders. In

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particular, the agency should not require payday lenders to perform a stringent
full-payment litmus test before approving a loan, which according to the CFPB
would require lenders to determine upfront that consumers can afford to repay
their loans without reborrowing. While we agree with the intent, the problem is
that the CFPBs own banking regulations have actually exacerbated the payday
lending problem, as consumers inability to obtain credit from community banks
have forced them to rely on more expensive lending outfits.
3. Finally, the agency must be subject to more meaningful Congressional oversight.
Congress has remarkably little authority over the agencyno ability to advise and
provide consent in the presidents choice of director, no power to remove the
director for any reason, no power to control funding. Whereas most federal
agencies have their budgets approved by Congress, the CFPBs budget is taken
from the Federal Reserve. This arrangement is possibly unconstitutional and is
certainly imprudent.
Applying a more judicious approach, the agency should be reorganized into a
bipartisan commission of five members, three representing one major party and
two the other, following the model of the Federal Communications Committee.
This proven structure would help establish more accountability in the agency,
and ensure that its policies are less extreme or partisan.
We believe that by implementing these changes, Congress will help ensure that the
CFPB can continue to operate in a way that ensures fairness in the marketplace and does
not harm consumers through unintended consequences.
Sincerely,
___________________________
Joseph J. Colangelo
Executive Director, Consumers Research

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