House Passes Bill Limiting CFPB Powers as it Prepares to Write Debt Collection Rules

The U.S. House of Representatives late Thursday passed a bill that would dramatically change the structure of the Consumer Financial Protection Bureau (CFPB) and limit the powers the agency was given to regulate the consumer finance industry.

The bill – HR 3193 – passed on a final vote of 232-182, with all House Republicans voting in favor of passage and 10 Democrats breaking ranks to vote with their GOP peers. The bill faces a certain death in the Senate, where majority leaders have said the bill would not even be considered. Even if the bill were to somehow make it through the Senate, President Obama has signaled his willingness to veto the legislation.

Among the key changes the bill makes is replacing the current CFPB Director position with a five-member bipartisan commission, similar to the structure of the Federal Trade Commission and Securities Exchange Commission. The bill would also fund the CFPB through Congressional appropriations rather than through the Federal Reserve, as is the current case.

HR 3193 also calls for the CFPB’s regulations to be subject to a simple majority vote in the Financial Stability Oversight Council, a 10-member panel that was created by the Dodd-Frank Act to monitor systemic risk in the financial industry. The Council can currently override any CFPB rule with a two-thirds majority.

The changes are important to opponents of the Bureau who say the CFPB is too powerful and unaccountable to Congress.  But the Bureau’s defenders note that the group is operating efficiently and without political encumbrance seen in federal agencies with commissions.

The bill gets specific with funding, providing the CFPB with a budget of $300 million annually for the next two years, about 60 percent of the Bureau’s budget for Fiscal Year 2014. After two years, there is no funding for the CFPB. But Republican House committee staff told the Washington Post that the GOP does not intend to “zero out the Bureau’s budget entirely,” and that spending levels going forward would be decided later.

A number of interesting amendments focusing on rulemaking were attached to the bill shortly before passage. One, from Rep. Scott Rigell (R-Va.), would require the CFPB to submit to the Financial Stability Oversight Council an analysis on the impact of any proposed rule or regulation on the financial industry, and an analysis of consumer and small business access to credit as a result of the regulation.

Rep. Ron DeSantis (R-Fla.) went even further in his agreed-to amendment, completely stripping the CFPB of rulemaking authority altogether.

Debt Collection Rulemaking Comment Period Closes

The vote came as the CFPB prepares to embark on a period of vigorous rulemaking. Today marks the end of the comment period for the Bureau’s advance notice of proposed rulemaking (ANPR) in the debt collection market. Beginning next week, the CFPB will be compiling and analyzing all of the public comments and start writing new rules to regulate the ARM industry.

The debt collection industry worked overtime in crafting comprehensive responses to the ANPR recognizing the opportunity to be involved in the rulemaking process.  ACA International announced that it submitted its response Thursday as did the Consumer Relations Consortium. Most other ARM industry trade groups also submitted comprehensive responses to the ANPR.

The industry could see new proposed rules by the end of 2014, although the comment process drew heavy attention from industry (both ARM and creditors), consumers and their advocates, and current financial regulators. More than 250 official comments have been published through the government’s Regulations.gov site and nearly 1,200 informal comments were logged on RegulationRoom.org, a new consumer-focused comment portal created in partnership with Cornell University.

In a few weeks, insideARM.com will be hosting a webinar, insideCompliance: Assessing the Impact of CFPB Rules on Debt Collectors, discussing the public ANPR comments and what’s next in the rulemaking process. Get a comprehensive first look at the comments collected by the CFPB in this timely, information-packed webinar. Understand what the data the CFPB collected means in terms of next steps for the industry. Learn from top compliance experts what collection agencies can do right now to get ready for more CFPB oversight.