As the Bureau of Consumer Financial Protection (slowly) considers a rule governing debt collections, a right-leaning think-tank has published its recommendations for how the agency should approach its rulemaking process.
[Editor’s Note: Speaking of the proposed debt collection rule — have you entered our pool yet? If you have entered, you can do so more than once]
The Competitive Enterprise Institute has a series of recommendations for the CFPB because rules that have been issued “have not been based on robust research or consumer desire for regulation,” and instead “have been driven by the Bureau’s ideological hostility to the financial services industry.”
In using a proposed rule governing payday lending as an example of what it considers to be rulemaking gone wrong, the CEI points out that only 1% of complaints submitted by consumers were related to payday loans.
This kind of data theoretically guides the Bureau’s rulemaking; it is not persuasive that there was ever a consumer protection problem to begin with.
The CFPB needs to rely less on behavioral economics in the rulemaking process, the CEI recommends, as well as improve the cost-benefit analysis it conducts when assessing the financial impact of a proposed rule. As well, the CFPB should establish an Office of Cost Analysis which “would go a long way to improving the Bureau’s rulemaking process,” the CEI wrote.
Among the other recommendations put forth by the CEI are:
Putting the Bureau on a regulatory budget;
- More carefully considering the effects of regulation on financial innovation;
- Creating a more transparent rulemaking process by enabling third-party access to economic data and methodology;
- Doing rigorous cost-benefit analysis of existing regulations;
- Including sunset clauses in discretionary rulemakings;
- Creating a small business liaison to communicate and coordinate rulemakings with the Small Business Administration; and
- Prioritizing required rulemakings over discretionary rulemakings
The Bureau’s rulemaking should be guided by well-researched, thoroughly justified, and appropriately crafted rules that implement the intent of Congress in the most efficient way possible. Regrettably, this largely has not been the case. Acting Director Mulvaney has an opportunity to repair this broken process.
