CFPB's Structure Poses Threat to Consumers

President Obama is expected to name the new director of the Consumer Financial Protection Bureau today, but Mercatus Center Scholar Todd Zywicki says the structure of the bureau should be reworked to ensure that protecting consumers doesn’t come at the cost of consumer choice.

“While a more coherent consumer-protection regime is needed, consumer-protection goals often conflict with other goals, such as promoting competition,” said Zywicki. “As an unaccountable bureaucracy with a single head, the bureau will be susceptible to bureaucracy’s worst pathologies: a tunnel-vision focus on the agency’s regulatory mission, undue risk aversion, and agency overreach.”

Zywicki says that a better model is found in the Federal Trade Commission’s Bureau of Consumer Protection where the mission is virtually identical to the CFPB’s, but the final decision rests with a five-member bipartisan commission to which the bureau reports, rather than a single director. “An effective consumer-protection regulator must be able to balance consumer protection against other benefits and the economy of greater competition, lower prices, and enhanced safety and soundness. The current CFPB is not structured to weigh those broader trade-offs.”