This summer, shortly before Dodd-Frank was enacted, I offered several suggestions on how the new Bureau of Consumer Financial Protection could be made more consumer-friendly. Several of my concerns were based on my experience working at the Federal Trade Commission and studying the regulatory process. In particular, I noted the dangers presented by the almost complete lack of any oversight or checks and balances of the new super-regulator. Obviously my concerns were not reflected in the final legislation.
Another proposal that I didn’t discuss then but which I now offer (together with two of my colleagues from the Mercatus Center) is to subject CFPB actions to OIRA review. We offer the proposal in a Reuters column “The Next Hot Ticket in Financial Reform.” We argue that although independent agencies (such as the Fed) typically are exempted from the OIRA review process, that is because they have internal checks and balances that mitigate some of the pathologies to which bureaucratic processes typically are prone. Notably, most independent agencies are headed by multi-member panels, often bipartisan in nature. While imperfect (as is OIRA review itself), it is at least arguable that this will provide some degree of deliberation and protection against tunnel vision and agency capture.
The CFPB, by contrast, is headed by one person with virtually unreviewable authority. It would be hard to imagine a bureaucratic design more susceptible to bureaucratic pathology than the CFPB. We argue that OIRA review might at least minimize some of the harm that the new Bureau inevitably is going to do to the economy and consumers.