Congress is considering legislative reforms to the Consumer Financial Protection Bureau, a financial regulatory agency that dropped multiple lawsuits against large banking institutions following President Donald Trump's freeze to the agency's work.
The CFPB is one of many regulatory agencies Trump is targeting for implementing what the administration calls overly burdensome rules and regulations for businesses. Upon taking office in January, Trump issued an executive order stopping all regulatory agencies from creating new rules. Later, the CFPB, under new leadership, dropped lawsuits brought during former President Joe Biden's administration against JPMorgan Chase, Zelle and other financial institutions.
Rep. Andy Barr (R-Ky.), chairman of the House Subcommittee on Financial Institutions and Monetary Policy, said during a hearing Wednesday that the committee will consider reforms to various aspects of the CFPB's structure and processes. That includes providing businesses with greater clarity on unfair, deceptive, or abusive acts or practices (UDAAPs); limiting the use of civil investigative demands (CIDs); transitioning its leadership structure from a single director to a bipartisan commission; and transferring agency funding to a congressional appropriations process for greater oversight.
Barr criticized the Biden administration's handling of business regulation and said former CFPB Director Rohit Chopra "prioritized politics over sound policy."
"Nowhere has overregulation and overreach been more evident than at the Consumer Financial Protection Bureau, which became the most unchecked and unaccountable agency in the entire federal government under the previous administration," Barr said.
Witnesses testify for changes to CFPB
David Pommerehn, head of regulatory affairs at the Consumer Bankers Association, testified in support of reforms to UDAAPs and CIDs, changing the CFPB's funding structure, and creating a five-person bipartisan commission to oversee the agency. The CFPB was established in 2011 following the 2008 financial crisis as an independent regulatory agency and enforcer of consumer financial protection laws.
To create long-term stability and credibility for the bureau, legislative reforms are needed.
David PommerehnHead of regulatory affairs, Consumer Bankers Association
Pommerehn urged policymakers to pass legislative reforms, as any changes made by the Trump administration alone can be "undone by the next administration." The political shifts between administrations have "created instability and uncertainty" for regulated entities, he said.
"To create long-term stability and credibility for the bureau, legislative reforms are needed," Pommerehn said. He added that creation of a bipartisan commission alone "would help reduce the radical pendulum shifts between administrations."
Rebecca Kuehn, a partner at law firm Hudson Cook practicing in consumer financial protection services, also testified in support of CFPB reforms, particularly around UDAAPs and CIDs.
"Its approach to consumer protection, particularly its use of enforcement actions to define activities the CFPB finds violates the law, has raised significant concerns about regulatory overreach and has created uncertainty in the financial services market," Kuehn said during the hearing.
While Rep. Bill Foster (D-Ill.) conceded that witnesses made valid points about CFPB policies that could be discussed, he lambasted the Trump administration's move to shut down the CFPB and limit other regulatory agencies that he said serve as watchdogs for consumers.
"These are not reforms, they are illegal attacks on the CFPB's congressionally mandated existence," Foster said during the hearing.
Without the CFPB, Foster said, big tech companies "will have free rein to invade the regulated financial system without accountability, while banks and credit unions continue to be highly regulated." Foster said he doesn't believe that the administration halting the CFPB's work is a "coincidence," pointing to Elon Musk's X, formerly Twitter, and its partnership with Visa on a payments platform that the CFPB "would naturally have the authority to regulate."
Makenzie Holland is a senior news writer covering big tech and federal regulation. Prior to joining Informa TechTarget, she was a general assignment reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.
