How CFPB Develops Policy:  The Way Forward


This is the final post in a series on how CFPB develops policy: the vision, the reality, recent changes, and the future.

CRREA Project offers recommendations on what can be done to course correct and build a CFPB that can serve consumers and the public for the next 100-years.

In creating the CFPB, in what was and is a radical departure from the structure and mandate of other federal agencies, Congress sought to give prominence to the voices and experiences of marginalized, or, in the language of the statute, “traditionally underserved”  communities, through research, consumer complaints, market monitoring, and what are known as the “special populations offices”–Servicemembers, Students, Older Americans, and Fair Lending.   In this blog series, we explore:  

  • How was CFPB uniquely designed to listen to the voices of the “traditionally underserved”?  
  • How have recent reorganizations at the CFPB have undermined this congressional mandate?
  • What could be done to course correct and build a CFPB that can serve consumers and the public well for the next 100-years? 

Current demands for racial and economic justice make this conversation, about how the CFPB can fulfill its charge to listen to the voices and experiences of traditionally underserved communities, more pressing than ever.

The Way Forward

In our series on how the Consumer Financial Protection Bureau (CFPB) develops policy, and the inclusion of marginalized communities’ perspectives in that policy development, we’ve talked about the  vision as set forth in the Dodd-Frank Act,  the reality of how the statutory structure was implemented,  and changes to the organizational chart under the Trump administration.  In this blog post, CRREA Project considers how future CFPB leadership could realize the Dodd-Frank Act mandate to listen and be responsive to traditionally underserved communities and consumers. 

We urge the agency to center the voices of marginalized communities as a necessary adjunct to promoting accountability under the statute.  The exigencies of the current moment, the demand for racial justice, the recognition that racial and economic justice are linked and that the pandemic is amplifying and embedding existing racial disparities, all call for us to move beyond the generalities of the statutory language.  Poor, rural, and immigrant communities, across racial differences, are all both underserved and poorly served by financial institutions.  Black people in particular have always been excluded from the financial mainstream in this country.  The CFPB should explicitly re-center its antidiscrimination mandate and address itself squarely to fostering racial and economic equity.

Recommendation 1:  Name it!  Identify Who Is Served by the CFPB’s Mission

What’s In a Name?

As a first step to re-dedicating itself to its statutory mission, the CFPB should take a public stance acknowledging the centrality of consumers and traditionally underserved consumers.  We should put behind us the  fight over the name of the CFPB, and whether “consumer” or “bureau” should come first.  Regardless of how often the statute put which one first, Congress was clearly focused on a certain set of concerns in the creation of the CFPB: consumer concerns and particularly those of traditionally underserved communities and consumers.  Consumer interests always come first in the Dodd-Frank Act, and so they should in how the CFPB understands its work and presents it to the public, whether through the website, the logo, or consumer education materials.  

The Strategic Plan

The CFPB’s current strategic plan runs through 2022.  In developing the new strategic plan, the CFPB will have the opportunity to revisit its mission and vision statements, as well as the overall goals for its work, including specific measurable goals to be reported on annually.  The CFPB should seize this opportunity to center consumers, and a recognition of the CFPB’s special responsibility to traditionally underserved communities, in its work. 

Recommendation 2:  Lay the Foundation! Regularize Public-Facing Research on Consumer Financial Products and Services and Traditionally Underserved Communities

The Office of Research

The Office of Research is the first of the statutorily mandated Dodd-Frank Act offices .  Its mandate includes research and reports on risks to consumers, access to credit for traditionally underserved communities, and the experiences of traditionally underserved consumers.  It has both world-class economists and access to datasets covering all consumer financial markets, in many cases with only a month’s lag time.  The CFPB also has the authority, in section 1022(c)(4) of the Dodd-Frank Act , to collect additional information from financial institutions. 

Foundational Research Questions

Those resources should be focused on foundational work on the role of consumer financial products and services in traditionally underserved communities.  When is disclosure effective and for what risks?  How do consumers view tradeoffs in access to credit versus risk?  How can we untangle when the benefits of credit to traditionally underserved communities outweigh the costs of credit?  For example, the subprime lending boom of the early 2000s promoted access to credit and led directly to both the foreclosure crisis  and the  loss of more than a generation of wealth accumulation for Blacks and Latinx.  Credit can open doors and it can close them. 

Making Research Visible

The Office of Research has done significant work in all of these areas and more.  The CFPB should follow the precepts of the bipartisan Foundations for Evidence-Based Policymaking Act and adopt a public “learning agenda .”  A public research agenda, coupled with a regular cadence of reports on issues of importance to traditionally underserved communities, could bring public accountability to this aspect of the CFPB’s statutory mandate.  For example, researchers look to the CFPB for its annual release of the HMDA data and accompanying reports analyzing that year’s data.  Changes to the user interface for accessing the data have brought congressional scrutiny.  The CFPB could also expand its discussion in its semiannual report to Congress of the “significant problems faced by consumers in shopping for or obtaining consumer financial products or services.”  That discussion could explicitly center the experiences of marginalized communities in accessing credit on fair and non-discriminatory terms.   

Recommendation 3:  Build It! Create a Structure that Reflects the Statute and Makes Visible Traditionally Underserved Communities

The Organizational Chart

The Trump-era CFPB organizational chart has moved four of the Dodd-Frank mandated offices and special units off the public-facing organizational chart.  The offices of community affairs, financial education, service members, and older Americans are now all housed inside the consumer education office, itself housed inside a new division of external affairs and consumer education.  Offices important enough for Congress to name are important enough to be visible on the public-facing organizational chart.  The public should know who leads those offices.  

Fair Lending

Any new leadership of the CFPB will have to consider the location of the Office of Fair Lending.  The move of the fair lending office from its initial home in the same division with supervision and enforcement to the Director’s Front Office was meant to refocus the fair lending office’s work on “advocacy, coordination, and education” instead of supervision and enforcement.  We at CRREA Project believe that leaving the Office of Fair Lending in the Director’s Office could be used to signal its cross-cutting importance to the work of the CFPB, if coupled with the necessary formal and transparent decision rights and processes. 

For example, the CFPB could publicly commit to a formal role for the Office of Fair Lending in priority setting across the agency. The CFPB could update its written procedures related to decisionmaking to embark on specific actions that would normally rise to the Director for final decision, such as authorizing specific enforcement actions.   Establishing formal and transparent decision rights and processes would provide accountability to Congress and the public.  Such actions could provide reassurance that fair lending was a central consideration in supervisory and enforcement actions without disclosing confidential internal CFPB deliberations. 

Other Structural Reforms

Other steps could include explicit roles for outreach connected to rulemakings to facilitate input from marginalized communities or a designated role for the statutory offices in providing input into policymaking.  Clarifying the role of the Community Advisory Board would assist both the CAB and staff in understanding the purpose and nature of their interactions.  Other agencies, such as the Environmental Protection Agency have, from time to time, published detailed guidance for staff and guidance for rulewriters about the agency’s policy decision processes.  This kind of work is foundational to consistent management across administrations and could contribute to the development of a culture and identity for the CFPB that lasts for generations.

Conclusion

Accountability to the underserved and poorly served consumers and communities the statute repeatedly calls out is critical.  Public-facing documents, like the strategic plan, a research agenda, or an organizational chart, afford one level of accountability.  They explain what the agency intends to do and offer a point of engagement for the public.  Future leadership should go further and embrace the statute’s emphasis on consumers and traditionally underserved consumers and communities to apply an explicit racial and economic equity lens to decisionmaking across the agency.  Doing so would build a CFPB robust and resilient enough to serve the public well for the years to come.