House Hearing on CFPB Blasts Agency’s Structure and Claims Regulatory Overreach

Critics of the Consumer Financial Protection Bureau (CFPB) said Wednesday (March 26) at a Capitol Hill hearing that the agency needs a restructuring, and has engaged in what they call “regulatory overreach” that merits a revisiting of its funding structure as well.

The hearing, before the House Subcommittee on Financial Institutions, was titled “A New Era for the CFPB: Balancing Power and Reprioritizing Consumer Protections.” 

In his opening remarks, Rep. Andy Barr, R-Ky., chair of the subcommittee, stated that “nowhere has overregulation and overreach” been as sharply in evidence at the CFPB.  He heralded the present era, under the new administration, where “those in charge prioritize administrative law over regulation by enforcement, avoiding extortionary civil investigative demands (or CIDs).”  Barr underscored legislation he’s recently introduced to restructure the CFPB, including the TABS Act, which would shift the funding structure to the congressional appropriations process.

Beyond Statutory Authority

In testimony offered before the committee, Bryan A. Schneider, partner at Manatt, Phelps & Phillips, said, “The CFPB has been prepared to press seemingly well beyond the grant of its authority by claiming, for example, that its ‘unfairness’ authority allows it to create a regulatory regime concerning alleged discrimination” and maintained that “the announcement of new regulatory requirements through blog postings, a Director’s speech, or other sub-regulatory pronouncements calls into question the legitimacy of the agency and creates a situation where regulatory expectations change rapidly.”

Separately, David Pommerehn, general counsel, head of regulatory affairs, Consumer Bankers Association said that under the Biden administration, “The CFPB frequently failed to follow the law and exceeded its statutory authority. This has resulted in an unprecedented number of lawsuits filed against the Bureau by entities that it regulates,” and charged that “The CFPB is led by a single Director with unilateral authority, which allows for significant political and policy swings when the Bureau’s leadership changes.” 

His testimony urged the passage of legislation that would establish a bipartisan commission to change the leadership structure at the Bureau and that an inspector general review the CFPB’s operations on a full-time basis.

Seth Frotman, former general counsel and senior adviser to former CFPB Director Rohit Chopra, offered up a defense of the bureau, stating that “In the decade since its creation, the CFPB has gotten back more than $20 billion for working people, on a budget that is a fraction of that size.”

And with a nod to DOGE’s efforts to cut staff and halt work at the CFPB, while rescinding past rulemaking and dropping legal actions, Frotman said, “The keys of our nation’s consumer watchdog [have been handed over] to the largest banks and tech companies in the world.”

Impact on Credit Unions

Testimony from Ana Fonseca, CEO of Logix Federal Credit Union, on what was billed as “behalf of America’s Credit Unions,” said that meeting CFPB compliance mandates as a $10 billion institution has placed significant burden on operations, tied to audits and staffing increases.

CFPB exam readiness review costs run into the hundreds of thousands of dollars, staffing costs have increased by millions of dollars, and those burdens are compounded by the fact that Logix has lost millions of dollars annually as a result of Durbin Amendment limits on interchange fees for institutional of Logix’s size.

Her testimony included the criticism, “The last few years have seen the CFPB place even more stress on regulated financial institutions as part of its ‘junk fees’ initiative, where the CFPB targeted lawful standard fees charged by financial institutions that included sensible payment guardrails such as credit card late fees and valuable member-requested services like overdraft programs.”

During remarks from Rep. Bill Huizenga, R-Mich., who has maintained that the structure of the CFPB prevents meaningful congressional oversight, the lawmaker said the “single director has no accountability and limitless funding.” 

Later during the hearing, Rep. Sean Casten, D-Ill., said about DOGE and Elon Musk’s targeting of agencies including the CFPB, that “If we give a damn about consumer protection … competition and markets, we should be petrified by what Musk is doing.” 

He asked Frotman about XMoney, on tap to launch later in the year, and where Musk has been given “God tier access” to CFPB data, to which Frotman said, “This is tremendously concerning for consumers and competition. Here is a person who has billions of dollars on the line … when it comes to turning Twitter into a payments company and a super app like we see happening in China and other places.”

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