Vought calls for more CFPB oversight, says open banking proposal coming soon

Congress should pass legislation to better define “unfair, fraudulent or abusive acts or practices” to avoid abuse by future regulators and to fund the Consumer Financial Protection Bureau through congressional appropriations to make it more responsive to elected officials, Russell Vought, acting director of the CFPB, told House lawmakers today. He also said the bureau is close to proposing a new open banking rule.

Vought, who is also director of the Office of Management and Budget, appeared before the House Financial Services Committee for an often contentious hearing on the CFPB during his tenure. Republican committee members and Vought described the CFPB as an often abusive, unaccountable agency that has cost consumers billions of dollars. Democrats argued that Vought broke the law in an effort to withhold funding and potentially eliminate the office, and that the agency actually saved Americans billions.

CFPB reforms

Asked what Congress could do to reform the CFPB, Vought said the current administration has concerns about the definition of abuse under the UDAAP and lawmakers could codify a better definition. The American Bankers Association and other parties sued the CFPB under the previous administration over changes to the UDAAP exam manual, arguing that the agency illegally expanded the statutory definition of “unfairness” to include discrimination. The CFPB agreed last year to drop its appeal of a federal court ruling that found the changes illegal.

Still, the most positive change would be making the office subject to Congress, Vought said. The CFPB is currently unique among federal agencies in that it funds the Fed.

“The degree to which (the CFPB) doesn’t have to come to Congress and approve its budget is a huge, huge problem,” Vought said. “I think that’s the number one thing I would point out to the board.”

Open banking

The CFPB has also been embroiled in legal battles over its enforcement of Section 1033 of the Dodd-Frank Act, the “open banking” rule that requires banks and other financial institutions to make consumers’ financial information available to themselves or to a third party at the consumer’s direction.

Vought said the CFPB is “very close” to a proposed rule that would replace the previous Rule 1033. However, he noted that President Trump has appointed former CFPB Deputy Director Brian Johnson to serve as the bureau’s permanent director. The agency is timing the release of the proposal with possible Senate confirmation for Johnson, he said.

“We support open banking as a concept and we’re working hard on it,” Vought said.