Senate Republicans Launch Three-Theater War on CFPB

Opponents of the power vested in the Consumer Financial Protection Bureau (CFPB) have begun a multi-front campaign to reduce or eliminate altogether the influence the Bureau has in the consumer finance industry.

Over the past week, two bills have been introduced in the U.S. Senate that directly address the operations of the CFPB in different ways, and 43 Republican Senators sent a letter to President Barack Obama vowing to oppose the confirmation of a Director of the agency.

On Thursday, January 31, Sen. Jerry Moran (R-Kan.) reintroduced legislation that would replace the CFPB Director with a five-member commission, similar to the governance structure of the Federal Trade Commission (FTC) and Securities and Exchange Commission (SEC). The bill — The Responsible Consumer Financial Protection Regulations Act of 2013 – would also subject the CFPB to Senate appropriations. The CFPB is currently funded by the Federal Reserve.

A multi-member commission to head the CFPB has been a goal of opponents since passage of the Dodd-Frank financial reform legislation.

“Allowing a single unelected official to define their own jurisdiction and regulate vast segments of our economy without accountability or restraint is irresponsible regardless of political party,” Moran said in a release.

On Friday, a group of 43 Republican Senators delivered a letter to President Obama vowing that they would block any confirmation vote on a Director for the CFPB until structural changes were made to the agency, including the appointment of a commission to head the Bureau. The previous week, Obama re-nominated current Director Richard Cordray to lead the CFPB and asked the Senate to confirm him.

The installation of Cordray as CFPB Director has been the source of bad blood in the battle over new financial rules.

Cordray was nominated in July 2011 to head the CFPB. But Senate Republicans blocked a vote on his confirmation for months as they tried to change the structure of the new agency to include a commission and more Congressional oversight. Obama used his recess appointment authority to install Cordray in early January 2012 while the Senate was in recess.

But the move has led to legal challenges, as Republicans insist they were not in recess. They had devised a plan to call pro forma sessions of Congress every third day specifically to block Cordray’s appointment. There is at least one ongoing lawsuit challenging Cordray’s appointment and authority to lead the CFPB.

One court case on a similar move by Obama has been decided, however. The U.S. Court of Appeals for the D.C. Circuit last week ruled that Obama’s other recess appointments at the same time, to the National Labor Relations Board (NLRB), were unconstitutional.

Senate Republicans pounced on the NLRB decision as proof that Cordray’s appointment would be ruled invalid as well.  On the same day that Moran’s bill was filed, another piece of legislation was introduced in the Senate that would roll back some of the rules passed by the CFPB and NLRB under the pretense that they were unconstitutional.

The Restoring the Constitutional Balance of Power Act of 2013, sponsored by Senator Mike Johanns (R-Neb.), would also block the CFPB’s next transfer of funds from the Federal Reserve to carry out any actions that require the approval of a Director.

“These agencies have been operating under a ruse for more than a year,” Johanns said. “Any decisions or regulations made by the people who have no right to be there are invalid. This legislation forces them to stop functioning as if they legitimately hold office and recognize the reality that the President overstepped his constitutional authority.”

The fight comes in a very important year for the debt collection and buying industry and its relationship with the CFPB.

Active supervision and examination of larger debt collection industry participants began in January. And the Bureau is expected to begin collecting consumer complaints about debt collectors in the second quarter of this year. The nomination fight should not impact either, however, as Cordray will serve as Director through the end of 2013 under his current term.