Last summer, passage of the Dodd-Frank Act brought with it thousands of pages of new rules and regulations on our financial services industry. Most were based on the faulty premise that capitalism caused the crisis, not the regulators failing to enforce existing laws.
Of course, Congress cannot let a crisis pass without piling on more regulations, and the Dodd-Frank Act did not disappoint. This new law created duplicative and unnecessary red tape that has the potential to raise credit costs and restrict access to credit, while codifying the “bailout” culture of Washington regulators.
One of the most harmful provisions in the controversial law was the creation of the Consumer Financial Protection Bureau. While its misleading name claims to provide protection for consumers, the new federal agency may have unintended consequences that do just the opposite.
For starters, unlike other federal agencies, the CFPB has no congressional oversight. Its funding comes directly from the Federal Reserve, and it sets its own budget, meaning it sits outside of congressional jurisdiction.
In addition, unlike other federal agencies, the CFPB will keep the fees and penalties it levies, giving it encouragement to do so. Between the two, we are talking about an unfettered supply of money that would flow into the new agency.
Second, this new well-funded agency will have vast jurisdiction to regulate consumer products and services, ranging from home loans to student loans, even your retirement plan — although CFPB promises it will regulate only some products in an emergency.
Even your iPhone apps could come under scrutiny of Big Brother if you bought your Christmas presents using your phone.
Using its authority to regulate and punish “abusive” lending practices — a legally ambiguous term — the CFPB will have the power to forbid certain loan terms or practices at will.
Would you want government telling you how to spend your money? Well, CFPB does just that by taking away consumers’ ability to decide for themselves what products work best for them. As usual, Big Brother knows what’s best for you and your family.
Then we come to the most concerning aspect of the CFPB. Unlike most federal agencies, this new agency, with a vast supply of money and a wide jurisdiction, is headed by a single man. This single-minded new “super regulator” won’t have the checks and balances required under the U.S. Constitution and will run full steam toward whatever agenda its powerful head has each day.
We can all agree that there are bad actors out there and that we need some regulations to protect consumers from unfair or deceptive practices.
However, the flood of regulations expected to come from the CFPB will hurt the law-abiding, job creating, honest small-business owners who bear the burden of complying with the whims of this Washington super regulator.
Rather than regulating, we need to work to inform consumers of potential hazards and then allow them to make their own decisions.
Regulating without regards for the indirect effects may result in unintended consequences that put consumers at more risk.
U.S. Rep. Lynn Westmoreland, R-Ga., represents District 3.
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