CFPB Must Now Justify Costs of Rules, Hensarling Warns
October 21, 2016 / Source: The National Law Journal
House Financial Services Committee Chairman Jeb Hensarling, seizing on a federal appeals court ruling last week, warned Consumer Financial Protection Bureau Director Richard Cordray on Wednesday that his agency is no longer independent and must now follow executive orders that require regulatory authorities ensure the benefits of proposed regulations outweigh the costs.
The U.S. Court of Appeals for the D.C. Circuit last week struck down as unconstitutional the power structure of the consumer agency, a decision that gave the president greater supervisory and removal oversight.
“These executive orders issued by presidents [Bill] Clinton and [Barack] Obama are modest attempts to ensure that executive agencies are accountable to the American people and do not recklessly write regulations that damage our economy,” Hensarling, R-Texas, told Cordray in a Wednesdayletter. “The court’s ruling makes clear that the Constitution requires the CFPB to operate as an executive agency, making the bureau obligated to fully comply with these executive orders.”
The CFPB will likely challenge the D.C. Circuit ruling in PHH Corp. v CFPB, as the agency indicated in a pending enforcement action in North Dakota federal district court.
Americans for Financial Reform argues that contrary to Hensarling’s pronouncement, CFPB is not subject to onerous executive orders regarding “Regulatory Planning and Review." The executive orders specifically exclude any agency defined as an “independent regulatory agency” by 44 U.S.C. 3502(5), which lists the CFPB by name. PHH v. CFPB did nothing to change that statutory definition," AFR says.
Hensarling told Cordray to provide his “written assurance” to the committee by Oct. 26 the he will abide by the executive orders before issuing or finalizing any rules, and he cautioned Cordray on further challenging the D.C. Circuit decision.
Hensarling’s Financial Choice Act, includes provisions to increase transparency and accountability in the rulemaking process by establishing cost-benefit analysis requirements for all financial regulators, including the CFPB.
In late September, Hensarling said that the Choice act, which also seeks to replace Dodd-Frank and kill the U.S. Labor Department's fiduciary rule, will likely move to the House floor for a vote after the election, and that presidential candidate Donald Trump supports the legislation.