Johnathan Sargent

Dodd-Frank is Crushing America's Credit Unions

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Posted by Johnathan Sargent on Tuesday, December 13th, 2016, 2:40 PM PERMALINK

Get ready to say goodbye to your neighborhood credit union! Slowly, but surely regulations imposed by Dodd-Frank are putting credit unions out of business across America. As a result of the Dodd-Frank regulatory burden, U.S. credit unions have seen skyrocketing compliance costs and loss of revenue that are not only hurting credit unions, but also the American consumers that they serve.

The financial services industry has always been a heavily regulated industry, but since the financial crisis the level of regulations placed upon this industry has reached astronomical heights. Instead of solving what caused the financial crisis, Dodd-Frank imposed a new regulatory regime upon the financial services industry. This has made the industry as a whole less profitable and less competitive. While larger institutions that are able to absorb these costs thrive under Dodd-Frank, smaller institutions, like credit unions, are left to struggle for survival.

Credit unions are staples of every community across America. They offer a consumer focus larger institutions are unable to give since credit unions are member-owned, and not purely for profit like many of their larger competitors. This commitment to consumers and communities allows credit unions to focus on helping members save and borrow and receive affordable financial services. In many cases this means lower rates, reduced fees, and personalized service. Dodd-Frank puts this all in jeopardy.

Under Dodd-Frank the cost to simply comply with regulations continues to increase. According to a 2016 study, credit unions see three sources of these increased costs from regulations: additional staff; third party expenses; and depreciation of capitalized costs.

In order to simply understand the complex rules put in place by Dodd-Frank, credit unions have to hire additional staff, and in order to make sure that they are complying with regulations they must hire third party companies to review their work. Fully one in every four credit union employees time is now spent on regulatory compliance. All of this extra staff and expenditures added up to an additional $6.1 billion in costs for credit unions in 2014 alone.

Unfortunately, not all credit unions are created equal. Naturally some credit unions have more assets than others, and as a result are able to spread the costs. In fact credit unions with assets under $100 million face a regulatory burden almost 3 times greater than credit unions with over $1 billion in assets. As a result revenue from these institutions are drastically affected by Dodd-Frank regulations like the Durbin amendment. Estimates show that the total impact of these regulations comes in at $1.1 billion in lost revenue in 2014, and that’s just the conservative estimate.

Fortunately, amongst all of this bad news there is some hope for the millions of Americans that use credit unions. President-elect Donald Trump and his nominee for Secretary of Treasury, Steven Mnuchin, along with a unified Republican government will have the tools to repeal much of Dodd-Frank. Should they need any guidance they will have the work of Representative Jeb Hensarling (R-Texas) and Senator Pat Toomey (R- Penn.) to use as a roadmap.

Photo Credit: Johnathan Haeber 

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Top 5 EPA Reforms That Scott Pruitt Will Likely Push

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Posted by Johnathan Sargent on Monday, December 12th, 2016, 10:41 AM PERMALINK

Last week President-elect Donald Trump tapped Scott Pruitt, the Attorney General of Oklahoma, to lead the Environmental Protection Agency (EPA). In Trump’s announcement he praised Pruitt as an “expert in Constitutional law” and stated that he “brings a deep understanding of the impact of regulations on both the environment and the economy.” As Pruitt has demonstrated during his tenure as Attorney General, he will work to “ensure American taxpayers and business are no long subject to abusive EPA overreach and unconstitutional regulatory diktats”.

Under the Obama administration, the EPA has become a political weapon used to block economic investment and job creation. Since 2009 the EPA has introduced nearly 4,000 new rules that have hurt the livelihoods of millions of Americans and cost taxpayers billions of dollars. Mr. Pruitt understands the negative effects of the EPA’s overreach and the benefits of the free market and limited government.

Here are the 5 EPA reforms that could occur under Pruitt’s leadership:

  1. Clean Power Plan. The rule mandates a 32 percent cut in the energy sector’s carbon emissions by 2030. As Attorney General, Pruitt has fought the Clean Power Plan at every stage, including in the draft stage before the rule was finalized last year. He has criticized the EPA for “ignoring the authority granted by Congress to states to regulate power plant emissions at their source”. This rule will undoubtedly be the top regulation for Pruitt to repeal as head of the EPA.


  1. Waters of the U.S. Rule (WOTUS). The WOTUS rule drastically expands the EPA’s jurisdiction, making small waterways like wetlands and ponds subject to federal rules and permitting processes. Pruitt took charge along with 17 other states to block the implementation of this rule. He has called the rule a “devastating blow to private property rights and is an unlawful power grab by the EPA over virtually all bodies of water in the United States”.


  1. Fracking Rule. This rule sets standards for well casing, transparency and wastewater storage for hydraulic fracturing, or “fracking” on federal land. Pruitt has long challenged the EPA’s failed attempts to link hydraulic fracturing to water contamination. He has stated that the hydraulic fracturing process is largely responsible for the boom in oil and gas production in the United States and that it is leading us towards greater energy independence.


  1. Ethanol Mandate. This rule requires renewable fuel to be blended into motor-vehicle fuels and fuels for non-road, locomotive, and marine engines in increasing amounts each year. As Attorney General, he filed a “friend of the court” brief in a lawsuit over the ethanol fuel mandate. In that filing, the Attorney General noted increased-ethanol fuel posed a risk to the fuel systems of many of the vehicles on the road today and could even void certain auto manufacturer’s warranties.


  1. Keystone Pipeline. By denying Keystone President Obama also snubbed his nose at the potential for job creation and economic development the KXL would provide to the U.S. As head of the EPA, Pruitt could be a powerful advocate for the Keystone pipeline. When discussing the effect of the pipeline, Pruitt has stated that Oklahoma’s economy has “already been boosted by the creation of good-paying jobs, and the project will continue to create jobs throughout the rest of the country.”


When Scott Pruitt becomes the next Administrator of the EPA, Americans will have a powerful advocate within the executive branch. Pruitt will work tirelessly to dismantle the regulatory regime created by the Obama administration in the energy sector and put an end to overreach by the EPA.


Photo Credit: Gage Skidmore

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Nine Dodd-Frank Regulations Congress can Repeal under CRA in 2017

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Posted by Johnathan Sargent on Wednesday, December 7th, 2016, 9:32 AM PERMALINK

With less than 50 days left, the Obama administration is pushing through as many regulations as possible. Fortunately, President-elect Trump and a unified Republican Congress have a powerful tool to repeal many of these last minute regulations. This tool, known as the Congressional Review Act (CRA), empowers Congress to review newly issued regulations and repeal them through the passage of a joint resolution.

The issuing of numerous, burdensome regulations is a cornerstone of the Obama administration. This year alone, the administration has issued an average of 2.2 rules per day. These regulations have led to billions of dollars in costs for Americans and small businesses.

Congress cannot repeal a majority of the Obama administration’s regulations under CRA, but it can undo the most recent ones. Under the CRA, Congress has 60 legislative days to disapprove the regulation, meaning that once the 115th Congress takes office in January certain last minute regulations enacted by the Obama administration can be undone.

What about two of the biggest parts of President Obama’s regulatory legacy, Dodd-Frank and Obamacare? While most of these regulations have already been implemented and must be repealed through Congressional legislation, certain Dodd-Frank regulations have been issued that fall under the 60-day window for CRA. A recent study published by the American Action Forum (AAF), highlights nine costly Dodd-Frank regulations that fall within this 60-day window.

Here are the nine regulations that could be repealed under CRA:



Cost (in millions)

Paperwork Hours

Disclosure of Payments by Extraction Issuers





Standards for Clearing Agencies




Data from Swap Data Repositories




Dissemination of Swap Information




Recordkeeping for Orderly Liquidation




Verification of Swap Transactions




Amendments to Swap Data Recordkeeping




Margin Requirements for Uncleared Swaps




Capital Requirements for Swap Entities





$1.7 billion in costs


























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CFPB Should Stop Work on Costly Arbitration Rule

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Posted by Johnathan Sargent on Thursday, December 1st, 2016, 11:34 AM PERMALINK

Earlier this year the Consumer Financial Protection Bureau (CFPB) proposed a new rule that would harm both consumers and businesses. This rule would ban the commonly used arbitration clauses in consumer finance contracts.

A report published by the Competitive Enterprise Institute (CEI) examined the rule and how by banning these clauses the CFPB is effectively forcing consumers to forgo the quick and relatively cheap option of arbitration and instead pursue the long and more cumbersome process of filing class action lawsuits. Such lawsuits only benefit high-priced lawyers at the expense of both consumers and businesses.

CFPB Director Richard Corday describes arbitration clauses as “contract gotcha that effectively denies groups of consumers the right to seek justice”. However, this statement could not be further from the truth.

According to the CFPB’s own study, arbitration often results in better outcomes for consumers. Class action lawsuits on the other hand are only approved by the courts 20 percent of the time. Those lucky enough to be part of the 20 percent of approved cases must wait an average of 3 years in order to see any kind of settlement while those involved in arbitration wait an average of 6.9 months.

That CFPB’s study also found based on a survey of over the 400 class actions against financial firms, the average payout to class members was less than $2.00 a person, much lower than typical payouts under the arbitration process.  

The arbitration rule is currently slated to be finished in 2017, but lawmakers are concerned the CFPB could look to push through the rule this year to circumvent President Trump blocking finalization. Such a “midnight regulation” from the CFPB would be ill advised and the Bureau should instead freeze its rulemaking on this issue and others until the new administration takes office.

Simply put, the arbitration rule is another example of the agency’s attempt to overregulate the financial services industry at the expense of consumers and businesses. In the 6 years that the agency has existed it has issued nearly 50 rules that have cost Americans and businesses billions of dollars in additional costs. Fortunately, next year consumers will have both a Congress and executive branch dedicated to protecting their interests and enforcing oversight of the CFPB.


Photo Credit: Brian Turner

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Top 5 Energy Regulations Trump Should Repeal

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Posted by Johnathan Sargent on Thursday, November 17th, 2016, 10:50 AM PERMALINK

A top priority for the Trump administration will be dismantling the regulatory regime left by President Obama. Over the course of his presidency, the Obama administration has issued over 20,000 new rules and regulations that have not only hurt small business, but also cost Americans over $100 billion. Some of the most harmful of these regulations are those imposed upon the energy sector, which have placed thousands of jobs in jeopardy and cost American companies and consumers billions of dollars.

President Trump will have no shortage of burdensome regulations to eliminate, but here are some of the most burdensome energy regulations that his administration should repeal: 

1. Clean Power Plan. The rule mandates a 32 percent cut in the energy sector’s carbon emissions by 2030. Currently, the fate of the rule is being discussed by the Washington D.C. Court of Appeals. If the case is still being argued by the time Trump is sworn in he could ask the Justice Department to dismiss the case. If not, Trump could have the EPA undo the regulation.

2. Waters of the U.S. Rule (WOTUS). The WOTUS rule drastically expands the EPA’s jurisdiction, making small waterways like wetlands and ponds subject to federal rules and permitting processes. This rule is also being held up in the courts. Like the Clean Power Plan, Trump could ask the courts to dismiss the case or order the EPA to dismantle the regulation.

3. Ozone Rule. This rule sets the allowable ozone level in air at 70 parts per billion, down from 75 under the Bush administration. This rule would have economically devastating impacts on local communities deemed to be out of “attainment” by the government. Like the other rules it is also being argued in court and the Trump administration could ask for the case to be dismissed or weaken the existing rule by not enforcing it.

4. Fracking Rule. This rule sets standards for well casing, transparency and wastewater storage for hydraulic fracturing, or “fracking” on federal land. It was overturned earlier this year by a federal judge, which the Obama administration is currently appealing. The Trump administration could simply drop the appeal in this scenario to undo the regulation.

5. Methane Rule. This rule was finalized recently by the Interior Department and sets new and costly regulations on energy development on federal lands. The rule would not only make recovery of affordable energy more costly, but is unnecessary and redundant as such emissions have steadily dropped in recent years thanks to advances in recovery technology. The Trump administration could also look to reverse this regulation with the help of the Republican controlled House and Senate next year.     

President Obama’s legacy is one of an increasingly burdensome regulatory regime. After 8 years it is apparent that these rules have done nothing but harm Americans and businesses across the country. Fortunately, with a Republican-controlled Congress, President Trump will have no shortage of options or support in repealing many of these regulations.


Photo Credit: Gage Skidmore

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President Trump Will Rein In CFPB

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Posted by Johnathan Sargent on Thursday, November 10th, 2016, 12:40 PM PERMALINK

The results of the election combined with the ruling by the Washington D.C. Court of Appeals all but ensure that the Consumer Financial Protection Bureau (CFPB) will be facing “bigly” changes very soon. With a Republican controlled Congress and executive branch beginning next year, the CFPB’s robust rulemaking will undoubtedly be reined in.

In the 5 short years since being established the CFPB has become a symbol of Washington’s regulatory mindset. By ignoring the voice of the American people, it has become the fastest rulemaking body in the federal government. In total nearly 50 regulations have been implemented by the agency that have led to billions of dollars in additional costs for American consumers and severely impacted small businesses across the country.

In October the agency was dealt a massive blow when the D.C. Court of Appeals ruled that its’ structure was unconstitutional. Overnight one of the most powerful and autonomous agencies in the federal government was forced to comply with extensive oversight as a part of the U.S. Treasury Department. 

As head of the executive branch, President Donald Trump will have no shortage of options as to how to deal with the CFPB. Currently, the agency must “ensure the benefits of their proposed regulations outweigh the costs”, but under a Trump Presidency he can further curtail the CFPB by firing its director and nominating a more pro-consumer one in his place.

If Trump requires additional options he can look to pending legislation in Congress. In September the House Financial Services Committee approved H.R. 5983, the Financial CHOICE Act. Introduced by Representative Jeb Hensarling (R-Texas), the Financial CHOICE Act significantly reduces the regulatory burden felt by American consumers and small business, and restructures the CFPB. It replaces the sole director of the agency with a 5-member bipartisan board and subjects it to oversight by Congress. Originally thought to be an uphill legislative battle, thanks to the election passage of the Financial CHOICE Act now looks within reach.  

After he officially takes the oath of office in January, President Trump will have the tools necessary to help American consumers and small business across America. The critical first step in doing so will be to rein in the Consumer Financial Protection Bureau. 


Photo Credit: Gage Skidmore

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CFPB Now Subject to Executive Orders Requiring Cost Benefit Analysis

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Posted by Johnathan Sargent on Thursday, November 3rd, 2016, 2:13 PM PERMALINK

Last month the Washington D.C. Court of Appeals ruled that the structure of the Consumer Financial Protection Bureau (CFPB), the brainchild of Senator Elizabeth Warren (D-Mass.), was unconstitutional. Until this ruling the CFPB was able to act independently and impose dozens of burdensome regulations upon small businesses and American consumers with no oversight. This ruling not only strips the agency of its autonomy by making it an agency within the executive branch, but it also subjects the CFPB to extensive oversight.

In the aftermath of this decision Representative Jeb Hensarling (R-Texas), Chairman of the House Committee on Financial Services, sent a letter to CFPB director Richard Cordray, notifying him that this ruling requires the agency to comply with all executive orders. Most importantly the CFPB must now follow orders requiring agencies to “ensure the benefits of their proposed regulations outweigh the costs”.

Specifically, the CFPB will now have to adhere to Executive Order 12866, issued by President Clinton in 1993, which mandates federal agencies “promulgate only such regulations as are required by law…or made necessary by compelling public need.” The order sets out basic elements agencies must consider when issuing rules, which most importantly include an evaluation of the benefits and costs of the proposed rules and identifiable alternatives.

Without oversight the CFPB was able to pass new rules and regulations affecting millions of Americans at a rate 2.5 times faster than any other government agency. Some of these rules not only made it harder for Americans to access credit, but also resulted in over $2.5 billion in costs. In the 5 years since the CFPB was created it has issued nearly 50 rules, each harming numerous Americans and small business.  

The court’s decision ensures more accountability and transparency from an agency that enjoyed “significantly more unilateral power than any single member of any other independent agency”. By forcing it to adhere to executive orders, the agency must now ensure that any future rules benefit the American people instead of burdening them as it has in the past. This is a critical first step in reforming the regulatory regime that bureaucrats in Washington have imposed upon the American people for nearly a decade. 


Photo Credit: Consumer Financial Protection Bureau

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Dodd-Frank is Crushing Small Businesses and Startups in America

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Posted by Justin Sykes, Johnathan Sargent on Thursday, October 20th, 2016, 2:47 PM PERMALINK

After 6 years, Dodd-Frank’s legacy is hindering American innovation. Since its passage, the Dodd-Frank Act has unleashed an onslaught of large and complex regulations. Because of these regulations the growth of American small businesses and startups has hit an all-time low. In a report by Third Way, these regulations are examined as a primary factor for this phenomenon.

The Third Way report found that while new businesses have played a historically large role in U.S. job creation, trends show that in recent years there has been a growing gap in borrowing opportunities for small businesses and startups. Contrast this with the fact that lending to large businesses has surged in recent years. Such trends can be tied to the fact that small banks are being forced to either consolidate or shutter their operations as a result of Dodd-Frank regulations.   

The impact of Dodd-Frank regulations on small businesses and startups begins with their effect on small banks, such as community banks. Dodd-Frank regulations have led to higher compliance costs, which are economically disastrous for smaller banks because they lack the vast resources that their larger competitors possess. According to a study by the Mercatus Center, 90 percent of banks stated that compliance costs have increased since 2010. The report by Third Way highlights that such community and small banks “bear a disproportionate regulatory burden.”

Because of these increased compliance costs, small banks are reducing the number of services that they provide. It is also the case that as community banks close due to skyrocketing compliance costs and other regulatory factors, sources of credit for small businesses are simply no longer available. This has led to a decrease in small business lending in the U.S.

For instance, since 2008 lending to small businesses has decreased by 15%, while lending to big businesses has increased by 35%. According to a 2015 Small Business Credit Survey, small business applicants were successful 76% of the time at small banks, versus 58% of the time at large banks. Thus as community banks close or consolidate, small business lending dries up. 

Small businesses are then left with no other option than to seek loans from lager banks, which cannot provide the same level of personalized service and competitive rates that community and small banks can provide. Ironically, as a result of Dodd-Frank, many large banks have also been forced to eliminate loans that after the financial crisis would be seen as too “risky”. For the most part, this means eliminating loans to businesses with less than $2 million in revenue, or alternatively eliminating loans less than $100,000 altogether.

This lack of access to credit has led to a reduction in the amount of startup firms in the U.S. In 1980, firms in their first year accounted for 13% of all companies, yet since 2010 that rate has dropped to roughly 8%. According to a 2015 survey by Federal Reserve banks, small businesses and startups are finding it increasingly difficult to obtain needed credit. The survey found that 63% of microbusinesses (firms with annual revenue under $100,000) and 58% of startups (firms less than two years old) were unable to realize their funding needs.

It is apparent that the onerous regulations imposed by Dodd-Frank have contributed to the decrease in startups and reduced access to credit for small businesses. This phenomenon not only hinders economic growth in the U.S., but impacts consumers as small businesses and startups are often leaders in product innovation. For those supporting Dodd-Frank, this should be a wake up call that it is time to look to much needed reforms that will encourage small business growth and innovation, instead of deterring innovation and competition in the market.

 Photo Credit: Ian Lamont

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Community Banks Under Siege By Dodd-Frank

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Posted by Johnathan Sargent on Friday, October 14th, 2016, 12:39 PM PERMALINK

Regulations imposed by Dodd-Frank have crippled America’s community banks. In the years following its passage, the financial services industry has witnessed a steady decline in the number of community banks operating in America. As these banks disappear, so does the valuable services that they provide communities and small businesses every day.

The Dodd-Frank Act was an attempt by Washington to impose a new regulatory regime upon the financial services industry. With the goal of promoting financial stability and protecting consumers, Dodd-Frank brought about some of the most significant changes to financial regulation since the Great Depression. The result has been over 22,000 pages of large and complex regulations affecting the entire industry.

These regulations have not only made American banks less competitive, but also led to the decline in community banks. While larger banks can afford to hire compliance personnel, smaller banks simply do not have the same capacity to read and understand, let alone comply, with these complex, burdensome regulations.

According to a study by the Mercatus Center, 90 percent of banks stated that compliance costs have increased since the passage. These higher compliance costs have forced community banks to discontinue certain products and services. This trends has only continued as the Consumer Financial Protection Bureau (CFPB) has begun to actively regulate mortgage lending, which has further led to increased costs faced by community banks. According to the report a majority of banks are considering changing or even eliminating certain services such as residential mortgages, home equity lines of credit, and overdraft protection.

These added costs have led to smaller banks being sold to larger banks, leading to an unprecedented trend of consolidation in the financial services industry. According to one article, since the passage of Dodd-Frank one in five American banks have disappeared and virtually no new banks have been formed within the same time period. Community banks find themselves competing with larger banks that have vastly more resources.

In most cases, as we have seen over the past 6 years since Dodd-Frank has been enacted, has been to close completely. Leading communities across the country to lose the kind of detailed and personally tailored services that only community banks can provide.

Fortunately, the House Financial Services Committee approved H.R. 5983, the Financial CHOICE Act, to ensure the survival of American community banks. This piece of legislation, introduced by Representative Jeb Hensarling (R-Texas), undoes the regulations imposed by Dodd-Frank and helps create a fairer environment for community banks to compete in.

The efforts made by Representative Hensarling and other lawmakers are greatly needed in order to ensure that communities across the country continue to receive the crucial services that community banks provide.


Photo Credit: Third Way Think Tank 

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Report Finds CFPB Fastest Rulemaking Body in Federal Government

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Posted by Johnathan Sargent on Thursday, October 13th, 2016, 10:10 AM PERMALINK

According to a report from the American Action Forum, the Consumer Financial Protection Bureau (CFPB) is the fastest rulemaking body in the federal government. In the 5 short years that the agency has existed, it has issued nearly 50 rules at a rate 3.5 times faster than any other government agency. The CFPB has quickly become synonymous with the overkill regulatory mindset that Washington is known for. Having unelected bureaucrats make rules and regulations without the input of the American people will not benefit consumers, but harm them.

The CFPB was born out of the Dodd-Frank Act, passed in 2010 in response to the financial crisis. Much like other provisions of Dodd-Frank, such as the Volcker Rule and the Durbin Amendment, the CFPB was intended to protect consumers and promote financial stability. However, again like much of Dodd-Frank, the CFPB has done nothing but burden American consumers and businesses with additional costs.

Of the nearly 50 rules that the CFPB has imposed, according to the report, 26 of them have directly resulted in “$2.8 billion in costs with an associated 16.9 million in paperwork burden hours”.

Additionally, with such a fast pace of rulemaking there will undoubtedly be errors. In the CFPB’s case that means an error rate of nearly 25 percent, meaning that of nearly 50 rules that the CFPB has passed, they have had to issue 13 corrections. This agency is a prime example of what happens when unelected bureaucrats are not held accountable and are given complete autonomy.

The CFPB is given this broad mandate and invested with a large amount of regulatory power, but is not subject to Congressional oversight. This large, bureaucratic agency thus has the power to affect millions of Americans however it sees fit with no avenues for retribution from consumers or Congress

Earlier this year, the CFPB proposed a new rule to regulate short-term lending. These added restrictions and regulations, according to one article, will “force thousands of small businesses to shutter, but also severely restrict the availability of credit for millions of Americans”. This is just one of the many rules that the CFPB has unilaterally implemented that will hurt hardworking Americans and American businesses.

Representative Jeb Hensarling (R-Texas), Chairman of the House Financial Services Committee, recently issued a statement about the CFPB’s leadership as “neither elected nor accountable to the American people”. The purpose of the CFPB is to make sure that financial products and services that Americans depend on every day work better for them. But how can unelected bureaucrats know what is best for the American people? The answer is that they cannot.

Hensarling’s sentiment, and the sentiment of many CFPB opponents, was further validated this week when the Washington D.C. Court of Appeals ruled the structure of the CFPB to be unconstitutional. The court found that the director of the CFPB, Richard Cordray, “enjoys significantly more unilateral power than any single member of any other independent agency” and that he is the “single most powerful office in the entire United States Government.”  

Fortunately, a handful of lawmakers are now looking at ways to fix the CFPB and make it more accountable. Last month the House Financial Services Committee approved H.R. 5983, the Financial CHOICE Act, introduced by Representative Hensarling.

This piece of legislation undoes much of Dodd-Frank, but most importantly it turns the director of the CFPB into a bipartisan commission subject to congressional oversight. Thereby subjecting the CFPB to Congress, the true representatives of the American people. It adds transparency and makes bureaucrats accountable to the American people.

Such reform efforts by Hensarling and other lawmakers are greatly needed and justified given the rampant rule making the CFPB has subjected American consumers to, and the recent ruling by the D.C. Court of Appeals.


Photo Credit: Christian Schnettelker

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