NTU has long warned that the Consumer Financial Protection Bureau’s (CFPB) unprecedented structure and overly aggressive enforcement agenda pose risks to taxpayers. Their overreaches, especially under Director Rohit Chopra, are reducing access to credit for Americans and generating enormous compliance costs.
Unfortunately, in a 7-2 decision this May, the Supreme Court invalidated a lower court holding that the CFPB’s funding structure, which insulates it from Congress’s appropriations process, is unconstitutional. This decision contains several negative consequences for taxpayers that may embolden future Congresses to circumvent their own appropriations process and thereby tie the hands of their successors with automatically funded agencies. This was not the intent of the framers who gave Congress the power of the purse as a check on the executive branch.
From the Federalist Papers:
“The Executive not only dispenses the honors, but holds the sword of the community. The legislature not only commands the purse, but prescribes the rules by which the duties and rights of every citizen are to be regulated.”
This could open the door to the creation of more agencies outside of Congress’s purview that would be enormously difficult to remove or rein in.
In the near term, it is already proving to be a costly decision for taxpayers since it has emboldened an already aggressive CFPB. Earlier this year, the CFPB issued an expansive and nebulous “circular” on comparison shopping websites that will likely disrupt internet commerce.
Since it is guidance, which does not have to go through the normal rulemaking process, parties don’t have an opportunity to submit comments and the CFPB didn’t have to go through the normal impact assessments or respond to critiques. It seems as though the Supreme Court’s ruling further encouraged an aggressive agency. By disallowing financial incentives within shopping tools, this guidance will disrupt many industries’ lead generation and negatively impact many websites from credit card comparisons to vacation booking. Most of these websites disclose any remuneration already, and operating on the assumption that consumers don’t understand that there are incentives at play disregards why they still use the websites. Aggregating multiple offers in the same place makes it much easier for consumers to make an educated decision regardless of how the information is presented.
Furthermore it seems that this rule may be boosting the CFPB’s efforts to create their own credit card comparison tool - another step from the Biden administration to supplant the private sector with big government. From Government-Owned Networks, to Obamacare, to Direct File, history demonstrates inserting the government into free markets as a competitor is usually disastrous. Government competitors are propped up by taxpayer funding and exist without consumer feedback on its efficacy or service.
If an executive fails to deliver a project on time or on budget, they will usually be harshly penalized either internally or externally through market forces, such as the stock market. If government bureaucrats underperform or otherwise make serious mistakes, there are little options for redress given the notorious difficulties in firing or disciplining federal employees.
Taxpayers should also be concerned about the CFPB’s recent rule on classifying Buy Now Pay Later services as credit cards. These services allow inflation-stressed families to afford goods and services with reasonable interest rates on an a la carte basis. Reclassifying these providers as credit card companies will likely increase the costs for consumers as compliance is passed along downstream.
As a whole, it seems that the Supreme Court’s decision will continue to embolden the CFPB’s aggressive overreaches. Taxpayers should be concerned that there are few opportunities to exercise control over this agency through Congress, and that it seems that the decision has kicked off an even more ambitious “regulation by enforcement” agenda by Director Chopra.