Consumer Financial Protection Bureau Boosts Its Budget, Oversight Duties


Richard Cordray, director of the Consumer Financial Protection Bureau, announced in congressional testimony Wednesday that his agency plans to spend $448 million next year, a 26% increase from its 2012 budget of $356 million. Meanwhile, The New York Times reports that the CFPB has proposed a draft rule which would allow it to supervise large debt collectors and credit reporting companies, two sectors of the financial industry that have heretofore been mostly ignored by the federal government.

Appearing before the House Financial Services Committee, Cordray didn't offer specifics on how the consumer watchdog would spend that extra money, telling his audience, "Our budget is a means to an important end: to make life better for American consumers." But Thursday's news offers a big hint: The CFPB will broaden its oversight duties to cover nonbank financial companies more extensively. The bureau's original mandate, as outlined in the Dodd-Frank Act, was to supervise mortgage originators, payday lenders and student loan providers. It began overseeing banks with assets over $10 billion on July 21, 2011.

In a statement emailed to media outlets, Cordray explained, "Our proposed rule would mean that those debt collectors and credit reporting agencies that qualify as larger participants are subject to the same supervision process that we apply to the banks."

Supervision in this context entails examining company records for evidence of violations of laws such as the Fair Debt Collection Practices Act or the Fair Credit Reporting Act. According to Bloomberg, companies that would fall under the CFPB's purview include credit bureaus Experian (EXPN), Equifax (EFX) and TransUnion, as well as debt collectors Asset Acceptance Capital (AACC), Portfolio Recovery Associates (PRAA) and Encore Capital Group (ECPG).

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Consumer reporting agencies like Experian and Equifax are the companies that generate credit scores and reports on borrowing history. Their work is therefore of critical importance to consumers, who need good scores to get favorable terms on loans for homes and cars. The CFPB would have the power to examine 30 such companies, which together account for more than 90% of the industry's revenue, The New York Times reports.

The CFPB has requested public comment for a 60-day period following publication of the regulation in the Federal Register. The proposal must be finalized by July 21.

Congressional Republicans, who have been vociferously critical of the CFPB -- in particular, what they perceive as a lack of appropriate oversight of the agency -- complained again during Cordray's testimony. Committee Chairman Spencer Bachus (R-Ala.) protested, "If they spend $100 million on paper clips, we can't even say, 'Wait a minute, you can't do that. Next year we're going to cut your budget.' We have absolutely no control."

But, as the L.A. Times noted, there's a reason for that: "The 2010 financial reform law set up the agency outside the congressional appropriations process. Instead, the money comes directly from the Federal Reserve's coffers with only an annual spending cap. The Obama administration pushed for the unusual process to prevent Republicans, who opposed the agency's creation, from starving it of money."

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