CFPB charged with ‘vague and uncertain’ rule-making

The head of a national business group is blasting the Consumer Financial Protection Bureau for going for what it calls “regulation by enforcement settlement” and the publication of guidance statements rather than writing clear regulations.

In a letter to CFPB Director Richard Cordray, the U.S. Chamber of Commerce President David Hirschmann charged the CFPB of neglecting to promulgate clear rules, putting lenders in continuous fear of inadvertently incurring the agency’s rage by unconsciously violating murky regulations.

“We highly believe that if the Bureau identifies areas where it wants to fundamentally alter the rules, it should take the time to write new standards rather than depend on one-off enforcement and press release ‘warnings’ to other regulated companies,” Hirshcmann wrote. “While we recognize that writing regulations may not always be the Bureau’s preference or the most practical process, the Bureau has a variety of other options, involving issuing detailed, practical guidance– following public comment and significant economic analysis– that both protects consumers and protects access to credit and gives controlled businesses the clear, understandable standards they need to ensure that they are adhering to the law.”.

Hirschmann charged the CFPB of allowing certain standards to stay “vague and uncertain,” which made it “difficult for companies to implement effective compliance systems.”.

“By utilizing ‘regulation by enforcement settlement’ incorporated with issuance of brief guidance statements– all without getting public comment on the question being dealt with– the Bureau has increased uncertainty regarding significant legal standards and made things practically impossible for companies to determine in advance what they should do to adhere to the law,” Hirschmann wrote. “Faced with regulatory uncertainty and the real potential of reputational risk coming from enforcement actions, a few market participants are abandoning or considering deserting consumer lending in areas where it’s not root to their business. The end result is fewer choices, less competition, and much higher costs for customers.”.