(By Thomas K Brown) It's no secret I'm no fan of the Consumer Finance Protection Bureau, and think it's an unaccountable, unconstitutional monstrosity that will create havoc in the banking industry even as it drives up the cost of credit for consumers. I won't bore you with my full tirade. Let's just say that any agency that's self-funded (via direct profits from the Federal Reserve, in this case), subject to very limited congressional oversight, and controlled by a single un-fireable individual rather than a bipartisan board is an agency that will sooner or later be out of control. There are a lot of things I don't like about Dodd-Frank; the creation of the CFPB is near the top of my list.
Having said that, I'm very much in favor of government regulation of consumer finance. Opportunities for financial services companies to abuse their customers are nearly endless--by, say, concocting bogus fees or failing to adequately explain the terms of their products. The government has a role to play in keeping the playing field level.
Given this, you can perhaps imagine my dismay when I read this week that the CFPB, with all its awesome powers singleness of purpose, has already begun to punt on doing its job. The issue in this case has to do with a new rule the agency has put in place regarding fee disclosure related to sale of remittances. Remittances are of course a hot-button issue for consumer advocates, since their fees often seem high and the people who buy them tend to be financially unsophisticated. Under Dodd-Frank, the CFPB is required to write a rule mandating disclosure of fees, exchange rates, and final payment amounts in international money transfers. Very sensible. The agency finalized the rule in February. And yet as it moves to implement it, the agency is considering exempting small institutions, which it is thinking of defining as those that send 100 or fewer remittances per year.
Wait a minute. Is the CFPB supposed to protect consumers or not? If it writes a rule (at least a disclosure-related rule as simple and straightforward as this one seems to be), the rule ought to apply to everybody. Carrying it out won't be burdensome, so why should small institutions get a pass? Alternatively if carrying out the rule will be unduly burdensome the agency might re-think it in the first place.
I'm at a loss to see how it's okay for one set of consumers get the benefit of the CFPB-promulgated transparency while another set of consumers, through no fault of their own, do not. If the CFPB thinks its new rule helps remittance buyers, then the new rule ought to help all of them.
As I say I've never been a fan of the CFPB. Now that I see how it's implementing even a sensible rule, I'm less of a fan than ever.