This past week, the Consumer Financial Protection Bureau announced that it will ask for public input on its operations, on everything from enforcement, supervision, rulemaking, market monitoring, and education activities. It’s not hard to guess which topics are likely to generate the most comments.
In fact, in its announcement, the CFPB already eliminated the guesswork about which area it will explore first: civil investigative demands (CIDs). The main public outcry over those will probably denounce the extremely short timeframe the CFPB has traditionally allowed for them: 20 days for a response or a legal petition to modify the CID or set it aside and 10 days to meet and confer with CFPB officials. Under current regulations, extensions of those deadlines are “disfavored.” But the enabling law for CIDs (12 U.S.C. 5562(c)) mandates that respondents be given a reasonable time to comply or object. The best course for the CFPB would be to adopt a more flexible response period, one that would vary based on the amount and type of material sought.
Overall, though, the most obvious area of reform needed at the CFPB is for it to ditch its regulation-by-enforcement mindset. That’s been a disastrous strategy from the very beginning, mostly because it results in vague standards and is highly susceptible to overdeterrence. Companies accused of wrongdoing by the CFPB have every incentive to settle quickly and move on. That allows the bureau to lard settlement orders with all kinds of borderline allegations that would likely never succeed in front of a neutral arbiter, like a judge. I expect many of the public comments the bureau receives will discuss the need for more deliberate and clear rule-making processes, like that which occurs for other federal regulations.
Other areas of public comment we are likely to see are requests that the CFPB set up some means of seeking informal guidance in advance of a company adopting a new practice or setting up a particular type of corporate affiliation. Most industry participants would be thrilled to have that sort of option so they could have peace of mind about a contemplated business strategy. Right now, the CFPB never does that, and before that, HUD would do so only rarely.
Finally, I expect that there will be many requests for formal rules regarding the CFPB’s authority under Dodd-Frank to police unfair, deceptive, and abusive acts and practices. The guidance that is out there right now is simply too open-ended to give businesses meaning information about when and where they will cross a prohibited line. The vague nature of this authority currently makes it very prone to abuse.