CFPB Under Threat, Why?

Kathryn A. Reed


The Consumer Financial Protection Bureau, created by Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act has an unprecedented structure that leaves it unaccountable to elected representatives and has broad authority to ban bank products it deems unfair, deceptive or abusive. House and Senate Republicans want to reform it. Here is why;

CFPB Structure is Unconstitutional

There are two main agency structures: commissions or multi-member boards and executive agencies. Commissions or multi-member boards are led by a group of people, usually experts in a specialized area, like you might find on the Federal Reserve Board of Governors.

Executive agencies have a single head. All cabinet-level agencies are ‘executive’ as well as a few others like the EPA. Usually the head of an executive agency can be fired by the president either for no reason whatsoever or with cause. What constitutes ‘cause’ is contained in an agency’s governing statute i.e. the law that created the agency.

This ability to remove a Director or Secretary is a very important check on the power of administrative agencies; however, the CFPB’s governing statute stipulates that the director may not be fired by the president. This was ruled unconstitutional by the D.C. Circuit Court of Appeals – the court which handles most administrative law cases – in October of 2016.

No Accountability to Legislature

The power to remove a Secretary is the main Executive check on an agency’s power. The main legislative check on agency power is the ability to control funding. This is called the appropriations process. As far as I am aware, every single other agency is subject to the annual appropriations process in which the Congress either passes a continuing resolution to continue funding or a regular appropriations bill that might contain different provisions than the agency had before. The CFPB is not subject to this process. It sets its own budget that is fulfilled by the Federal Reserve.

The importance of accountability to elected representatives cannot be overlooked. A key portion of the zeitgeist of the founding era is contained in the words ‘no taxation without representation’. The British Empire lost its political legitimacy due to the then-present King’s “repeated injuries and usurpations” as laid out in the Declaration of Independence. Now that so much of our legislation comes from agencies, in order to maintain our government’s democratic legitimacy we must ensure that these agencies are accountable to elected representatives.

Overly Broad Authority.

Director Cordray has been called the second most powerful man in Washington, behind the President of course. When the CFPB was created it was given charge to enforce twenty-two existing federal statutes and a broad directive to “protect consumers from unfair, deceptive or abusive practices”.  The problem with this is that agencies now have the ability to interpret their own statutes as long as their interpretation passes the two-step Chevron test. Step one: is the statute clearly at odds with the agencies interpretation? If not, proceed to step two: is the interpretation reasonable? If so, the court will defer to the agency’s interpretation of its statute. This is termed Chevron Deference. This test almost always allows the agency’s interpretation to stand giving them overly broad authority to affect everyday Americans and the businesses that work to make their lives better.

There are also some checks on the CFPB’s power like the long rulemaking process, judicial review of their actions and the ability to appeal an enforcement decision. But the desire for reform is strong and understandable. Agencies should not legislate. That is a power vested in Congress that they cannot throw off to another entity and go home. The CFPB’s structure, lack of accountability and overly broad authority spell too much power concentrated in an unelected body. Ever since I realized that so many of our laws no longer originate with Congress I have been looking for a way to do something about it. There are good reasons to have commissions and executive agencies but they must be accountable to elected representatives, have constitutional structure and have only narrow and specific authority.


Comments are closed.

Create a website or blog at

Up ↑

%d bloggers like this: