11TH APR 2019 | WRITTEN BY: CHRIS SIEROTY IN WASHINGTON, D.C.
The Consumer Financial Protection Bureau (CFPB), which was created by the U.S. Congress in response to the financial crisis in 2008, is among the federal government’s most controversial agencies, with some lawmakers describing it as a “rogue agency.”
Republican Senator David Perdue of Georgia, who has been leading efforts in the Senate to reform the regulator and have its new prepaid card rule repealed, said the agency was a “real problem” due to a lack of congressional oversight.
“The CFPB is the only agency that we can find that has no oversight from Congress,” Perdue told attendees Wednesday at the Power of Prepaid 2019 conference in Washington, D.C.
The CFPB — created as part of the 2010 financial regulatory overhaul known as Dodd-Frank — enforces protections for consumers primarily in the areas of student loans, mortgages and credit cards. The agency has taken aim at for-profit colleges and pay-day lending.
Perdue and other Republicans have criticized the CFPB for supposedly being too independent, arguing that its single director has too much unchecked authority.
He has now reintroduced the CFPB Accountability Act of 2019, which would subject the agency to the annual congressional funding process and oversight. Dodd-Frank established the CFPB’s budget at as much as 12 percent of the annual operating expense.
Perdue filed his first bill in 2015 and has introduced this proposal in every session of Congress.
“The CFPB is the only agency that we can find that has no oversight from Congress. Sooner or later, we are going to get a vote on it,” said Perdue, a former chief executive of Reebok and Dollar General Stores and a member of the Senate Banking Committee.
The senator also expressed his frustration with forming any kind of consensus in Congress.
“Your industry is no different,” Perdue said. “You have the CFPB elephant sitting there threatening all of [your] enterprises and the idea of over-regulations … we’re already proven that didn’t work.”
Perdue, who was elected to the Senate in 2014, was also one of several lawmakers to introduce a bill to stop the CFPB from implementing a rule that provided protections for consumers of prepaid card accounts.
In 2017, Perdue said the rule would “stifle growth” in the electronic payments industry. The legislative effort fell short and the CFPB’s prepaid rule went into effect on April 1, 2019.
The effective prepaid rule date was originally October 1, 2017, which was then amended to April 1, 2018, before being further delayed.
The delays were in response to industry and Republican criticism that the proposed rule was overly complex and would impose too great a burden on payment providers and prepaid account companies.
“We got them to the table to negotiate the prepaid rule, giving you something that you can live with for a while, but we aren’t done with that yet,” Perdue said.
In general, the final rule requires financial institutions to provide consumers with information regarding fees, as well as short and long-form disclosure statements prior to the acquisition of the account.
Under the amended rule, if a financial institution proves pre-acquisition disclosures in writing, and a consumer subsequently completes the acquisition process online or by telephone, the financial institution need not provide the disclosures again electronically or orally.
The amended rule also does not require a financial institution to provide the long-form disclosure if it had not obtained the consumer’s contact information.
The CFPB eliminated the need to deliver a long-form disclosure after the card is purchased without e-sign consent, as long as the information is included in the packaging.
Brian Tate, president and chief executive of the Innovative Payments Association (IPA), reminded attendees at the same event that the CFPB’s final rule is now in place and yet “the sky hasn’t fallen.”
He noted that prepaid accounts had become a “critical part of the financial industry.”
Those categories of prepaid accounts include general-purpose reloadable cards, gift cards, government benefits or disbursement cards, and incentive or payroll cards.
“Once and for all, we can say we are a regulated industry,” said Tate, whose association hosts the Power of Prepaid conference. “That’s a good thing. It means we have arrived.”