Shedding Light on the Abuses and Overreach of the Consumer Financial Protection Bureau

The United States government is built upon a three-part separation of powers. In broad strokes, Congress (the policymaking leader) enacts law, the president, via the Executive Branch, enforces law, and the courts resolve disputes. In the last century or more, this structure has become badly confused as Congress has unconstitutionally vested legislative and judicial powers in the administrative state, best exemplified in the numerous, so-called “independent” regulatory agencies that oversee virtually every facet of American economic life. Particularly during the Biden era, federal agencies have become increasingly unaccountable, overreaching, and lawless. These actions waste taxpayer money and hurt consumers.

To combat such arbitrary rule and agency mission creep, the Taxpayers Protection Alliance Foundation (TPAF) has extensively documented and publicized the abuses committed by such agencies as the Federal Trade Commission and the Securities and Exchange Commission.

But no entity typifies America’s transition from constitutional governance to rule-by-bureaucrat more than the Consumer Financial Protection Bureau (CFPB). TPAF has launched CFPB Mission Creep to shine a light on the financial watchdog’s abuses.

Authorized in 2010 by the Dodd-Frank Act, the CFPB possesses vast and vague powers over financial institutions. These are powers insulated from democratic accountability that the agency interprets liberally to the detriment of consumers. Dodd-Frank forbade the president to fire the CFPB director without cause and empowered the agency to fund itself. The Supreme Court excised the first layer of insulation in 2020, ruling that the president must retain authority over agency hiring and firing. The Supreme Court is now reviewing whether the CFPB’s funding mechanism, which the 5th Circuit U.S. Court of Appeals held to be unconstitutional, accords with the Appropriations Clause.

The Constitution’s exclusive grant to Congress of the “power of the purse” ensures democratically elected legislators can rein in rogue bureaucrats. However, the CFPB is immune from this check; as its self-set budget is drawn directly from the Federal Reserve – another unaccountable agency. In 2022, the Fed lacked couldn’t cover the nearly $700 million in checks the CFPB cuts every year, so they “printed” more money and gave it to the CFPB without any Congressional involvement. This is unacceptable.

This lack of accountability has facilitated a series of statutorily dubious regulatory actions through which CFPB technocrats seek to unilaterally micromanage American businesses. The New York Times aptly summed up this dynamic, writing that “[CFPB Director Rohit] Chopra insists that he always follows the rules,” but “His view is that he’s simply more expansive than others in determining what those rules are.”

To the CFPB’s supporters, legislation-by-administrative-fiat is a feature, not a bug, of the agency’s structure. Their aim is to circumvent the standard processes of democratic lawmaking and infuse “enlightened” bureaucrats with maximal latitude to regulate businesses and the American economy. Defenders of the CFPB’s expansive power believe that should the agency sometimes color outside the lines of its statutory authorities, all the better — it will nonetheless enact progressive financial regulation, including many policies that Congress would likely never approve.

The CFPB has exploited its position energetically to impose anti-business and anti-consumer regulations.

For example, it has worked to compel Americans needlessly to disclose sensitive financial and personal information and to limit financial institutions’ discretion to issue mortgages to borrowers with sub-par credit scores. The CFPB has even cracked down on benign practices such as online pop-up windows and drop-down menus.

A 2023 agency policy statement ruled that regulators may establish “abusive conduct” by a company without a “showing of substantial injury.” Essentially, this language frees the CFPB to pursue cases arbitrarily, untethering enforcement actions from provable consumer harm. According to the agency, business practices that could draw regulatory scrutiny as “abusive” include incredibly broad – and typically standard – practices such as multi-step online click-throughs, delayed customer support, fine print and complex language, and form contracts.

The agency is, as columnist George Will writes, “what progressives since Professor Woodrow Wilson…have desired: Congress, and politics, marginalized by administrative state ‘experts’ insulated from political accountability.” As a former CFPB deputy director recently noted, the agency lacks the consent of those it governs.

Lawmakers have begun to understand the harms that a structurally unaccountable bureaucracy brings to the American constitutional system and to average Americans — particular when that bureaucracy assumes legislative powers. As the Supreme Court deliberates, politicians, the media, and advocacy and civil-society groups must continue to scrutinize the agency’s lawlessness.

In the end, however, pushback to the CFPB and similarly unaccountable agencies must flow from the American people and their elected officials.

CFPB Mission Creep will help educate the public and policymakers and act as a watchdog on the funding and abuses of the agency, ultimately prescribing remedies to the overreach of the CFPB.

David Williams is President of the Taxpayers Protection Alliance Foundation (TPAF).