CFPB continues to avoid following mandated rulemaking process

CUNA, NAFCU, and financial services organizations wrote to President Joe Biden this week asking for him to emphasize the need for proper rulemaking procedure. The organizations noted the Consumer Financial Protection Bureau continues to issue guidance that operates as a rule without the notice and comment process.

The CFPB continues to creatively avoid following the notice and comment rulemaking process as required under the Administrative Procedure Act,” the letter reads. “In each rulemaking, agencies must thoroughly examine the costs and benefits of the proposed regulation. And they should base their conclusions on timely and relevant data that is rigorously analyzed.

“Unfortunately, the CFPB tends to ignore the costs of its regulations on the business community, including significant compliance costs for financial products and loan operation systems within each lender, new policies and procedures, systems acquisitions and changes, and the development of extensive training that would be required,” it adds.

The organizations note the CFPB has failed to account for the cumulative impact of its numerous rulemakings, guidance documents, and informal proclamations via blog post or speech on banks and lending, costs that will ultimately be passed onto the consumer, contrary to the administration’s goal of reducing fees.

“We hope that you will express the need for regulation via rulemaking as opposed to enforcement across your administration. We were discouraged to read that the CFPB is planning to hire 50% more enforcement attorneys during the next few months,” the letter reads. “”In the CFPB’s 2022 financial report, 44% of the Bureau’s entire workforce was already dedicated to its Supervision, Enforcement & Fair Lending Division.8 However, only 10% of the CFPB’s workforce is in the Research, Markets & Regulations Division.

“Pursuing enforcement actions against a few players with the hopes of influencing the behavior of all other market participants is not nearly as effective in improving compliance as writing rules that apply clear standards across the industry,” it adds.