On January 31, 2017, Senators Sherrod Brown (D-OH) and Elizabeth Warren (D-MA) sent a letter to Democratic Senators arguing that the single director structure of the Consumer Financial Protection Bureau (“CFPB”) should not be replaced with a five-member commission.  Specifically, the Senators warned that attempts to restructure the CFPB are intended “to prevent the agency from doing its job” and would “empower Republicans to strangle the agency” by blocking appointees, which could prevent the CFPB from operating.

In defending the single director structure of the CFPB, the Senators gave examples of two multi-member agencies—the National Labor Relations Board and the Export-Import Bank—where Republicans have blocked appointees and effectively hamstrung operation of the agencies.  The Senators did not mention other multi-member agencies, including the Federal Trade Commission (“FTC”), the Federal Deposit Insurance Corporation (“FDIC”), and the Board of Governors of the Federal Reserve System (“Federal Reserve Board”) that have typically operated in a business-as-usual manner notwithstanding periodically unfilled seats. The FTC, FDIC, and the Federal Reserve Board operate under flexible quorum requirements or delegated authority to establish their own quorum requirements.  The Financial CHOICE Act of 2016, which passed the U.S. House of Representatives in the 114th Congress and would have restructured the CFPB as a five-member commission, provided that as few as two members would constitute a quorum for conducting commission business.  A revised version of the Financial CHOICE Act is expected to be introduced in the 115th Congress; the revised bill may leave the single director structure of the CFPB in place.

The letter also asserts that the CFPB has not imposed significant compliance costs on community banks and credit unions.  In particular, the Senators emphasize that the CFPB does not supervise banks with fewer than $10 billion in assets and has no role in enforcing the Bank Secrecy Act or other anti-money laundering laws.  Senators Brown and Warren further maintain that small banks and credit unions have benefited from the establishment of the CFPB and present statistics demonstrating the growth of these institutions since the financial crisis.

Although CFPB supervision does not extend to banks with fewer than $10 billion in assets, CFPB regulations apply to small banks and credit unions and directly impact smaller financial institutions.  Congress recognized in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 the compliance costs smaller financial institutions could face as a result of CFPB regulations.  For this reason, Congress subjected CFPB regulatory initiatives to the Small Business Regulatory Enforcement Fairness Act (“SBREFA”), which requires certain agencies, including the CFPB, to conduct a Small Business Advocacy Review panel for proposed regulations that may have a significant economic impact on a substantial number of small businesses.  The CFPB’s handling of the SBREFA process, however, has been criticized by some community bankers as a “check-the-box” exercise that does not give serious consideration to the burdens CFPB regulations impose on small banks, credit unions, and other small financial institutions.  A Government Accountability Office report noted that the vast majority of small-business review panelists were not satisfied with the CFPB’s final rules.

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Photo of David Stein David Stein

David Stein advises clients on credit reporting, financial privacy, financial technology, payments, retail financial services, and fair lending issues. He assists a broad range of financial services firms, consumer reporting agencies, financial technology companies, and their vendors with regulatory, compliance, supervision, enforcement, and…

David Stein advises clients on credit reporting, financial privacy, financial technology, payments, retail financial services, and fair lending issues. He assists a broad range of financial services firms, consumer reporting agencies, financial technology companies, and their vendors with regulatory, compliance, supervision, enforcement, and transactional matters.

Mr. Stein has significant experience advising clients on compliance with the FCRA, GLBA, ECOA, EFTA, E-Sign Act, TILA, TISA, FDCPA, Dodd-Frank Wall Street Reform and Consumer Protection Act, and FTC Act, as well as state financial privacy laws. Mr. Stein is a member of the firm’s fintech and artificial intelligence initiatives and works with clients on issues related to cutting edge technologies, such as blockchain, virtual currencies, big data and data analytics, artificial intelligence, online lending, and payments technology.

Mr. Stein previously served in senior regulatory, policy-making, and management positions at the Consumer Financial Protection Bureau (CFPB) and the Federal Reserve Board (FRB). He played a significant role in developing regulations and policy on credit reporting, financial privacy, retail payments systems, consumer credit, fair lending, overdraft services, debit interchange, unfair or deceptive acts or practices, and mortgage origination and servicing. Mr. Stein draws upon his government experience in representing clients before the CFPB, the FRB, and other regulatory agencies and leverages his insights into the regulatory process to provide clients with practical, actionable advice.