The Bureau of Consumer Financial Protection's Unconstitutional Design
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THE BUREAU OF CONSUMER FINANCIAL PROTECTION’S UNCONSTITUTIONAL DESIGN HEARING BEFORE THE SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS OF THE COMMITTEE ON FINANCIAL SERVICES U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED FIFTEENTH CONGRESS FIRST SESSION MARCH 21, 2017 Printed for the use of the Committee on Financial Services Serial No. 115–6 ( U.S. GOVERNMENT PUBLISHING OFFICE 27–247 PDF WASHINGTON : 2018 For sale by the Superintendent of Documents, U.S. Government Publishing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Nov 24 2008 15:54 Jan 08, 2018 Jkt 027247 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 K:\DOCS\27247.TXT TERI HOUSE COMMITTEE ON FINANCIAL SERVICES JEB HENSARLING, Texas, Chairman PETER T. KING, New York MAXINE WATERS, California, Ranking EDWARD R. ROYCE, California Member FRANK D. LUCAS, Oklahoma CAROLYN B. MALONEY, New York PATRICK T. MCHENRY, North Carolina NYDIA M. VELA´ ZQUEZ, New York STEVAN PEARCE, New Mexico BRAD SHERMAN, California BILL POSEY, Florida GREGORY W. MEEKS, New York BLAINE LUETKEMEYER, Missouri MICHAEL E. CAPUANO, Massachusetts BILL HUIZENGA, Michigan WM. LACY CLAY, Missouri SEAN P. DUFFY, Wisconsin STEPHEN F. LYNCH, Massachusetts STEVE STIVERS, Ohio DAVID SCOTT, Georgia RANDY HULTGREN, Illinois AL GREEN, Texas DENNIS A. ROSS, Florida EMANUEL CLEAVER, Missouri ROBERT PITTENGER, North Carolina GWEN MOORE, Wisconsin ANN WAGNER, Missouri KEITH ELLISON, Minnesota ANDY BARR, Kentucky ED PERLMUTTER, Colorado KEITH J. ROTHFUS, Pennsylvania JAMES A. HIMES, Connecticut LUKE MESSER, Indiana BILL FOSTER, Illinois SCOTT TIPTON, Colorado DANIEL T. KILDEE, Michigan ROGER WILLIAMS, Texas JOHN K. DELANEY, Maryland BRUCE POLIQUIN, Maine KYRSTEN SINEMA, Arizona MIA LOVE, Utah JOYCE BEATTY, Ohio FRENCH HILL, Arkansas DENNY HECK, Washington TOM EMMER, Minnesota JUAN VARGAS, California LEE M. ZELDIN, New York JOSH GOTTHEIMER, New Jersey DAVID A. TROTT, Michigan VICENTE GONZALEZ, Texas BARRY LOUDERMILK, Georgia CHARLIE CRIST, Florida ALEXANDER X. MOONEY, West Virginia RUBEN KIHUEN, Nevada THOMAS MacARTHUR, New Jersey WARREN DAVIDSON, Ohio TED BUDD, North Carolina DAVID KUSTOFF, Tennessee CLAUDIA TENNEY, New York TREY HOLLINGSWORTH, Indiana KIRSTEN SUTTON MORK, Staff Director (II) VerDate Nov 24 2008 15:54 Jan 08, 2018 Jkt 027247 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 K:\DOCS\27247.TXT TERI SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS ANN WAGNER, Missouri, Chairwoman SCOTT TIPTON, Colorado, Vice Chairman AL GREEN, Texas, Ranking Member PETER T. KING, New York KEITH ELLISON, Minnesota PATRICK T. MCHENRY, North Carolina EMANUEL CLEAVER, Missouri DENNIS A. ROSS, Florida JOYCE BEATTY, Ohio LUKE MESSER, Indiana MICHAEL E. CAPUANO, Massachusetts LEE M. ZELDIN, New York GWEN MOORE, Wisconsin DAVID A. TROTT, Michigan JOSH GOTTHEIMER, New Jersey BARRY LOUDERMILK, Georgia VICENTE GONZALEZ, Texas DAVID KUSTOFF, Tennessee CHARLIE CRIST, Florida CLAUDIA TENNEY, New York TREY HOLLINGSWORTH, Indiana (III) VerDate Nov 24 2008 15:54 Jan 08, 2018 Jkt 027247 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 K:\DOCS\27247.TXT TERI VerDate Nov 24 2008 15:54 Jan 08, 2018 Jkt 027247 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 K:\DOCS\27247.TXT TERI C O N T E N T S Page Hearing held on: March 21, 2017 ................................................................................................. 1 Appendix: March 21, 2017 ................................................................................................. 37 WITNESSES TUESDAY, MARCH 21, 2017 Gorod, Brianne J., Chief Counsel, Constitution Accountability Center .............. 9 Olson, Hon. Theodore B., Partner, Gibson, Dunn & Crutcher LLP .................... 4 Prakash, Saikrishna Bangalore, James Monroe Distinguished Professor, Uni- versity of Virginia School of Law ........................................................................ 6 White, Adam J., Research Fellow, the Hoover Institution ................................... 8 APPENDIX Prepared statements: Gorod, Brianne J. ............................................................................................. 38 Olson, Hon. Theodore B. .................................................................................. 52 Prakash, Saikrishna Bangalore ....................................................................... 68 White, Adam J. ................................................................................................. 81 ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD Wagner, Hon. Ann: Letter from the American Financial Services Association ............................ 95 Letter from the Consumer Bankers Association ............................................ 96 Ellison, Hon. Keith: Slide entitled, ‘‘CFPB Actions to Enforce the Real Estate Settlement Procedures Act’’ ............................................................................................. 100 Green, Hon. Al: Written statement of Americans for Financial Reform ................................. 101 Amicus Brief from PHH Corporation v. Consumer Financial Protection Bureau ........................................................................................................... 106 Written statement of the Center for American Progress .............................. 128 Waters, Hon. Maxine: Letter from Consumers Union ......................................................................... 131 (V) VerDate Nov 24 2008 15:54 Jan 08, 2018 Jkt 027247 PO 00000 Frm 00005 Fmt 5904 Sfmt 5904 K:\DOCS\27247.TXT TERI VerDate Nov 24 2008 15:54 Jan 08, 2018 Jkt 027247 PO 00000 Frm 00006 Fmt 5904 Sfmt 5904 K:\DOCS\27247.TXT TERI THE BUREAU OF CONSUMER FINANCIAL PROTECTION’S UNCONSTITUTIONAL DESIGN Tuesday, March 21, 2017 U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. The subcommittee met, pursuant to notice, at 10:08 a.m., in room 2128, Hon. Ann Wagner [chairwoman of the subcommittee] pre- siding. Members present: Representatives Wagner, Tipton, Ross, Messer, Zeldin, Trott, Loudermilk, Kustoff, Tenney, Hollingsworth; Green, Ellison, Cleaver, Beatty, Capuano, Gottheimer, and Gonzalez. Ex officio present: Representatives Hensarling and Waters. Chairwoman WAGNER. The Subcommittee on Oversight and In- vestigations will come to order. Welcome. This is my very first time chairing the Subcommittee on Oversight. We are going to have— Ranking Member Green and I have just spoken. Many of our mem- bers are still in conferences. The President of the United States is speaking to our conference at the moment, so folks are going to be a little tardy in streaming in, but we want to get started on your testimony. And many have already seen your written testimony as you have submitted it. So today’s hearing is entitled, ‘‘The Bureau of Consumer Finan- cial Protection’s Unconstitutional Design.’’ Without objection, the Chair is authorized to declare a recess of the subcommittee at any time. The Chair now recognizes herself for 4 minutes for an opening statement. For the past 8 years, the American people, under the Obama Ad- ministration, have grown complacent with the unchecked power emanating from Washington and its complete disregard for the Constitution. From health care to energy to financial services, Washington has worked to plan every aspect of your life and decide what is best for you. Now, more than ever, we have a new obligation to examine the checks and balances of our Federal Government, and ensure that our Constitution is reflected by it. It is time to bring accountability back to Washington for we, the people. Nothing embodies the Washington-knows-best mindset more than the Consumer Financial Protection Bureau (CFPB), by remov- (1) VerDate Nov 24 2008 15:54 Jan 08, 2018 Jkt 027247 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\27247.TXT TERI 2 ing choices and making access to financial products more difficult under the guise of consumer protection. Since the creation of the CFPB, we have seen regulations that make it more difficult for con- sumers to qualify for a mortgage, obtain an auto loan, and access forms of credit. The superseding independence of the Bureau has demonstrated how a lack of checks and balances can lead to abuse. In the majority opinion of a case last October, a Federal judge ruled that, ‘‘The Director of the CFPB is the single most powerful official in the entire U.S. Government other than the President.’’ As a result of a lack of safeguards, we have seen examples of widespread discrimination within the CFPB itself under Director Cordray’s tenure, to which this committee has held five hearings itself. Additionally, without the ability of Congress and the Execu- tive Branch to carry out proper oversight, the CFPB has become arrogant in its cloak of unaccountability by pursuing policy and regulating entities outside of its authorized scope, to the detriment of consumers. Without proper checks and balances, the natural tendency of gov- ernment is always to continue expanding its power and reach, and the CFPB has been a perfect example. The CFPB is unaccountable to Congress in that it does not rely upon Congress for funding; in- stead, taking its funding stream from the Federal Reserve, to be allotted by the CFPB Director with no review from Congress. As a result, the CFPB has grown comfortable in repeatedly ignoring oversight requests made by this committee, including for subpoe- naed records. Additionally, the CFPB is unaccountable to the President as well as