Capital Corner: CFPB Strategic Plan a Good Start, But Just a Start

The Consumer Financial Protection Bureau’s (CFPB) strategic plan, released in April, outlines a set of laudable goals. At its core it articulates a new, and overdue, focus on preventing consumer harm and a commitment to adhering to its statutory mandate.

After reading it, however, I am left with an uneasiness that a CFPB governed by a single director, subject to minimal oversight, could lapse into old patterns of overreach. In other words, any reforms put in place by the current management could be transitory and easily erased in the future unless Congress enacts durable reforms.

The Plan sets the course for 2026-30. It declares an intent to address “tangible consumer harms,” defined as concrete damage that a court would recognize, including financial losses that a victim of fraud can prove by producing evidence. This alone represents an improvement in past CFPB practices. For example, the Bureau issued plans in 2022-23 aimed at somehow preventing “presumed injuries” or “dignitary harms,” neither of which could ever be defined in law. Those days are over.

Another positive is a declaration that CFPB will combat overregulation while honestly assessing the costs and benefits of regulation. Again, a very laudable goal—credit unions will want to see evidence that it is being achieved.

Throughout the document is a commitment for CFPB to stay within its statutory mandate. In plain English that means CFPB will follow the law. In the past CFPB had often made unilateral policy moves based on nothing but their internal views about the merits of a financial industry practice instead of an actual law on the books. The arbitrary $8 cap on credit card late fees imposed on credit unions and other financial institutions in 2023 is an example of CFPB making it up as they go along rather than adhering to what Congress wrote into law.

The CFPB was designed to be an extra-independent agency, absolved of congressional budgetary oversight. This has fostered a serious lack of accountability. The Bureau’s creators may have intended to insulate it from the influence of financial firms on Congress but failed to recognize unchecked influence in the other direction by those who advocate frankly anti-business and anti-market policies.

If I were given the pen on the Strategic Plan, I would have included two recommendations that CFPB should make to Congress:

• Put CFPB under the congressional appropriations process. This would inject a significant degree of accountability that comes from an ideologically diverse legislature. No matter which party is in the majority, the power of the purse should be applied to CFPB’s work.
  
• Reform the governance of CFPB by eliminating the sole director structure and replacing it with a multi-member, bi-partisan commission. Would this prevent quick, immediate (some would say hasty) actions undertaken by CFPB? You bet, and that’s a good thing. Both CFPB and the consumer finance marketplace it oversees would benefit from having a more deliberative and temperate blending of opinions guiding its future policymaking.
  

Implementing the good ideas contained in the Strategic Plan is a start. But there’s work to be done on Capitol Hill—a reformed and responsive CFPB would benefit American consumers, and credit unions would find a lot to like about that.