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Adam White on the Consumer Financial Protection Bureau

Adam White on the Consumer Financial Protection Bureau

Sarah Oh:

Welcome back to Two Think Minimum, the Technology Policy Institute’s podcast. Today is Tuesday, November 23rd, 2021. I’m Sarah Oh, Senior Fellow of the Technology Policy Institute. I’m joined by Tom Lenard, Senior Fellow and President Emeritus at TPI. We are delighted today to host Adam White for a conversation about federal independent agencies, the administrative state, and in particular, the Consumer Financial Protection Bureau or CFPB, and for an update after the Supreme Court decision in Seila Law v. CFPB in 2020. 

Adam White is the Co-Executive Director of the C. Boyden Gray Center for the Study of the Administrative State at the Antonin Scalia Law School at George Mason University. Adam is also a Resident Scholar at the American Enterprise Institute and a Public Member of the Administrative Conference of the United States. Adam has served on the Leadership Councils for the Administrative Law Sections of both the ABA and the Federalist Society. After clerking for Judge David B. Sentelle of the Court of Appeals for the DC Circuit, Adam practiced constitutional and regulatory law in Washington with special focus on energy infrastructure regulation, financial regulation, administrative law, and constitutional separation of powers. Thank you, Adam, for joining us today.

Adam White:

Thanks, Sarah. Thanks, Tom. It’s a real pleasure to be here.

Sarah Oh:

So, we thought we would bring on an expert on the CFPB, and if you could just update us or give a brief summary of what the Supreme Court ended up deciding about recess appointments for a single director of the CFPB, and where is the CFPB now after that decision?

Adam White:

Well, sure. The CFPB, for listeners who aren’t totally up to speed on it, is an agency that was created in 2010 as part of the Dodd-Frank financial reforms President Obama signed. The CFPB was a response to the perceived problem that consumer financial protection duties… so regulation of say your mortgage or your credit cards, that kind of thing, to make sure the consumers are getting a fair shake from these service providers and lenders. 

Those duties were often spread across a number of agencies, and the CFPB was created to be the one-stop-shop for consumer financial protection at the federal level. Like a lot of federal agencies, like the Federal Trade Commission, the CFPB was given some independence from the president. The president could not just fire the CFPB director at will, the way he could say a secretary of state, but unlike most independent agencies, almost all independent agencies, the CFPB was not a five-person bipartisan board, like at the FTC. It was just one, and only one, director.

And so, from the very start, that was seen as a constitutional issue, to say the least, at the CFPB, and litigation proceeded for many years. And just so your listeners know, I’m hardly an unbiased neutral observer on these things. I was involved in the original constitutional lawsuits against the CFPB back in 2011, when I was practicing at the firm of Boyden Gray & Associates. I’m no longer in practice, but in recent years, those constitutional fights against the CFPB continued and culminated, as you suggested, in a Supreme Court decision called Seila Law v. CFPB, in which the Supreme Court agreed that the CFPB structure is unconstitutional. 

I can flesh that out in a second, but just one little nuance along the way. You mentioned recess appointments, that’s when the president appoints a head of an agency without getting the Senate’s advice and consent, because the Senate is in a recess at that time. The president has that constitutional power. That was another fight the CFPB found itself in. Again, in the case I was litigating, because President Obama, when he appointed the CPFB’s original Director, Richard Cordray, he did it without bothering to get the Senate’s advice and consent. He said, “Well, the Senate’s in a recess, so I can just appoint whoever I want.” 

Well, the Senate said they weren’t in a recess, and that issue related to other appointees in that same day, that also was struck down as unconstitutional by the Supreme Court a few years earlier in a case called Noel Canning. Now that recess appointment issue, it did didn’t really affect Richard Cordray at that moment because he had subsequently received Senate confirmation. It doesn’t affect the current head of the CFPB, Rohit Chopra, whose appointment, maybe we’ll get into a little bit later, but it’s another good example of the fact that the CFPB has found itself in sort of a swirl of constitutional and political challenges from the very moment of its creation. And I think that continues through to today, and I’m happy to get into this issue about the CFPB structure and independence a little bit more if you’d like, but I better just stop for a minute. I’ve already said quite a lot. 

Tom Lenard:

Well, I have one question about that. What is the significance of the single administrator versus the multi-member commission? I guess it has legal significance, but why?

Adam White:

Well, it all goes back almost a hundred years. About a hundred years ago, the Supreme Court issued a big decision in a case called Myers, reaffirming the president’s constitutional power to fire his senior leaders in his administration, that we would call them officers in the constitution. Just a few years later, in a case called Humphrey’s Executor, the Supreme Court backed tracked a little bit and said, well, the president’s power to fire officers can be limited by Congress when you’re talking about a multi-member commission that’s been given independence because it’s not just a traditional executive office, but it’s more of a “quasi-legislative, quasi-judicial office.” That’s the Supreme Court’s term. And so, that case that involved the Federal Trade Commission, and so, for a very long time, you’ve had this division of agencies in Washington: the single headed agencies that are seen as executive agencies and these multi-member commissions.

Now, what the Supreme Court said in Seila Law is, so long as that case Humphrey’s Executor remains on the books, the courts need to take seriously the difference between a single headed agency that answers to the president and this multi-member structure, which is intended to create more deliberation, more moderation, more consensus. That comes out of a process when you have free commissioners from one party, two from the other. 

Now, of course the president’s going to have a majority on the commission at almost any time, and so ultimately, even a multi-member commission is going to follow the president’s preferred policies, generally. That said, still the having the multi-member structure and requiring more process, somewhat more consensus, the opportunity for descending statements by the other commissioners, means you are going to get a slower pace and maybe a bit more moderation and compromise in these multi-member commissions. Again, that’s the idea, that you wouldn’t think of these agencies… you wouldn’t see them as just an arm of the executive branch, but they take on some of the qualities of a legislature or a multi-member court. 

Sarah Oh:

I read your Amicus brief for the earlier case. There is an issue about appropriations as well. The CFPB, it might be a creature of the Federal Reserve because its funding comes from the Federal Reserve. It’s $600 million a year that’s not appropriated by Congress. What does that mean for the independence of the agency or oversight?

Adam White:

It’s a huge, huge deal because in addition to the question about the CFPB structure and its independence from the president, which was the issue in Seila Law, where the Supreme Court recently said that the Congress could not give the CFPB director independence from the president. He or she has to be totally susceptible to the president’s direction, hired with the Senate’s advice and consent, but fireable at will by the president for any reason, or no reason at all. 

That’s all separate from a second issue, which remains lingering around the CFPB. And it’s the fact that Congress gave up its power of the purse over the CFPB. Most agencies are funded through appropriations. That’s the hook. There’s a great line James Madison wrote in one of the Federalist Papers where he said the power of the purse is the most effectual check against the overgrown prerogatives of other parts of government.

That power of the purse was, from the very beginning, Congress’s main power over administration in addition to just writing the laws. And it’s a great tool for sort of day-to-day oversight while the laws remain in place. Well, some agencies have received funding outside of that process. Some, like the FCC, gets some funding, and the Federal Energy Regulatory Commission, gets some funding out of user fees and that kind of thing. The CFPB was given total independence from Congress. As you noted, instead of going sort of hat in hand to Congress, asking for money every year, the CFPB again, led by just one director, goes to the Federal Reserve. The CFPB is nominally part of the Federal Reserve System, even though it’s independent of the Fed. It goes to the Fed, and he doesn’t really have to ask. He can just say, I would like my $600 million now, and the Federal Reserve System funds the CFPB totally, without any kind of discretion from Congress. Congress can try to do oversight, but we’ve seen over the CFPB’s first decade, Congress, really its oversight powers are very, very limited because it doesn’t have anything in terms of the power of the purse to reign it in. So, the CFPB is, in effect, totally independent from Congress. And from the very start, that’s one of the other constitutional issues that I and others have raised about the CFPB. I think it really contributes to the CFPB’s boldness in two directions. 

One, is pushing back at Congress. In the early years of its existence, the first CFPB Director had some amazing oversight hearings in Congress, where a member of Congress would ask him about his spending on a new building, and he snapped back really aggressively and kind of lashed back at the Congresswoman and said, “Well, what business is it of yours?” And other hearings, members of the Senate asked if the CFPB would try to define some of the terms of its very vaguely worded statutes more precisely through rule making, and the director just kind of shrugged it off and said, “Well, I don’t think that to be very helpful. We’ll just kind of decide these interpretations as we go.” 

So, the CFPB has from the start really pushed its boundaries visa-vis Congress. It’s also pushed its boundaries in terms of its regulatory authority. There are some things that the CFPB regulates that are pretty straightforward parts of its statutory mandate, things like mortgages, things like credit cards. There was a specific carve out of the CFPB statute of authority over auto lending and nevertheless, the CFPB sort of pushed for more power over auto loans and tried to demand more information, sort of regulatory authority over those things too. And so, you see the CFPB often pushing at its boundaries, like all agencies, but with even less restraint from Congress, which has made it again, I think, the most controversial agency in modern times. 

Tom Lenard:

So, the $600 million, is that at the Fed’s discretion? They could raise it, or lower it, or not?

Adam White:

No, it’s defined by statute. It was originally set as a percentage… in its opening years, it was set as a percentage of the Fed’s annual operating revenues. It’s been a long time since I’ve looked at the specific numbers. If I remember correctly, it was something… I might be totally wrong here, so listeners can feel free to set me straight, but I think it might have been around 10% of the Fed’s operating budget, and the math came out to somewhere around $600 million. 

Sarah referred earlier to an Amicus brief that I filed when I was still in private practice. We filed it in the Supreme Court case involving recess appointments, and we highlighted some of the structural issues related to that case in the special circumstances of the CFPB, and we really focused on the power of the purse issue. So, the Director of the CFPB, Director Chopra, he doesn’t even have to say, “please.” He could just come and demand his money. We should all be so lucky. 

Tom Lenard:

He, even though it’s nominally part of the Fed, it’s not really accountable to the Fed.

Adam White:

That’s right. There’s always… the statute was always very hazy on this. It’s, if I remember correctly, the Dodd-Frank said it’s an independent executive agency within the Federal Reserve System, and nobody’s ever known quite what exactly that means. I should say, by the way, in the early years of the CFPB, when it would publish its annual report, it really went out of its way to stress how independent it was, especially in terms of not having to go to Congress for appropriations. Now, the CFPB itself and its supporters, including Senator Warren who played a crucial role in its creation, they said that the CFPB needed to be independent of these outside funding streams, like Congress, so that it couldn’t be captured by political influence in Congress. And, obviously regulatory capture is often a real problem, and I don’t presume that every member of Congress is always, at all times, doing what’s in the public interest, but I see Congress’ power of the purse as a fundamental part of constitutional accountability for better and for worse.

The CFPB, in its early years, really liked to brag that it wasn’t accountable to Congress. Frankly, after we started kind of calling them out on that in our early legal filings, they started to be a little bit less cavalier bragging about their independence from Congress. I mentioned Senator Warren, just one last thing, this really has always been her creation. She’s its champion in the Senate, but she called for its creation in the first instance in around the time of the 2008 financial crisis. She wrote an article in the quarterly journal Democracy. Not the Journal of Democracy. That’s different, but Democracy, a quarterly journal where she called for the creation of basically a multi-member consumer protection agency for financial services modeled on the Consumer Product Safety Commission. So, she originally wanted a multi-member structure too, but over time, it became this sort of special novel agency. And many years later, after her election to the Senate, she remains its staunchest advocate on Capitol Hill.

Tom Lenard:

Well, maybe we can get into this issue of its relationship to FTC issues, if any… and obviously the new Director of the CFPB, Rohit Chopra, was a Commissioner at the FTC, and just recently became director, and seems reluctant to leave FTC issues behind. And they have just issued a request for data from some of the big tech companies that’s ostensibly, you know, talking about their payment systems, which I guess gives it some relationship to, well, you could correct me if I’m wrong on any of the things I’m saying… ostensibly gives it some relationship to the CFPB’s mission, but it seems to be a pretty broad request for data on what these companies do, the types of data they collect and what they do with it. So I guess the question, you know, there’s multiple questions there. What are the limits of the CFPB’s authority? What’s the delineation of the lines of authority between the CFPB and the FTC? Could the CFPB regulate these companies through the back door, via their payment systems? 

Adam White:

So, the CFPB has a few sets of authorities. One is it just inherited a lot of preexisting federal statutes governing financial services, including the Fair Credit Reporting Act, which maybe we’ll get to in a little bit, it’s relevant to another case the CFPB got involved with. That’s one bundle of authorities. These old statutes. Another bundle of authority is the CFPB, in the Dodd-Frank Act, has a broad mandate to regulate against unfair, deceptive or abusive acts and practices in connection with financial services, or I guess it’s unfair, deceptive and abusive financial services and products. In the Dodd-Frank Act, as it defines certain aspects of the CFPB’s authority, it does specifically refer to payments for those who are keeping score at home, this is at 12 USC, 55 12, and it’s a laundry list of authorities and definitions. 

But in its definition of authorities, one thing that gets listed is, and I’ll just give a quote here, I have it in front of me, “providing payments or other financial data processing products or services to a consumer by any technological means, including the processing or storing financial or banking data for any payment instrument or through any payment systems or networks used for processing payments data.” And it goes on to specifically refer to online banking and mobile telecommunications networks. So, the CFPB, at first glance, does have pretty broad authority with respect to online payments. 

Now to answer your question. The CFPB is getting involved in these tech companies. The FTC has already been involved with these tech companies, the Department of Justice and others, the FCC, others are getting involved with these big tech companies. How does the CFPB’s power fit into this? And I describe it as this, the CFPB has its authority I just mentioned over payments. The FTC has a couple of sets of authorities. One is the monopoly issue, the antitrust issue. So, the FTC, like the Justice Department, has authority over companies when they get too big or when they start doing anti-competitive acts or practices intended to sort of push competitors out the market and give it a monopoly or maintain monopoly. The FTC also has another bundle of authority over just consumer protection. And that’s where you come very, very close to the CFPB. The CFPB has consumer protection on financial services. 

The FTC has consumer protection in general to make sure the consumers know generally about the products that they’re buying; they’re getting what they’re paying for and so on. And that’s a gross over simplification. I have a lot of colleagues at George Mason’s law school who could give you a much more precise description. A lot of them have been FTC Commissioners who’ve served on the FTC, so they know it inside and out, but just very generally, you’ve touched on a crucial problem here, which is that the CFPB’s authority to protect consumers on financial services comes very close to the FTC’s broader consumer authority, especially when they’re looking at the same companies who are offering consumers a bundle of payment services and other services.

So, just a few weeks ago, the CFPB under again, its new director, issues an order to a number of companies. If I remember correctly, it was Apple, Amazon, Facebook, Google, and then some of the more specifically payment services like PayPal and Square. It issued an order to all of them, and it posted sort of a generic version of the order on the CFPB’s website, ordering these companies to submit information regarding their payment services and practices. And these get pretty detailed in what they’re looking for in terms of how these things are offered publicly to consumers, and also how they’re handled within sort of the back office, so to speak, the actual payment technology, and the CFPB has expressed interest in privacy and data harvesting and the use of consumers’ data, and so on, where again, it’s going to come very close to the FTC.

The CFPB also said it wants to study these practices as used by a couple of Chinese companies, WeChat, and also Alipay. I don’t know how the CFPB is going to assert authority over these foreign companies and what it means to study them, but it has at least acknowledged that these issues, these technologies are not limited to the United States, but I’ve gone on way too long. But let me just say, Tom, because you do raise such a great question, I just want to put a fine point on this for listeners. The whole point of the CFPB’s creation was that there were so many authorities spread so broadly across the federal government that it was important to concentrate them all in one agency, again, to make the CFPB, the one-stop-shop. 

Well, the CFPB’s authority overlapping with other agencies, the FTC, in another case we might talk about, the Henderson case, they filed a brief with the FTC and also with, I think some North Carolina regulators. The whole point of the CFPB is lost when the CFPB is just sort of part of a swarm of agencies, all looking at the same things, but with different authorities, different specific legal authorities and powers. It begins to confuse more than it clarifies. Now, again, the CFPB does have very specific authority over payments, but for that reason, I think the CFPB needs to be very careful about stretching its mandate. It needs to be very, very clear about precisely what its role is versus the FTC and the Justice Department, the states, and others, precisely so that Congress, the president, the people, and courts can hold the CFPB accountable for its specific part of all this, and then hold the FTC accountable for its specific part of this. And so on.

Tom Lenard:

So, a couple of questions with respect to this. So, let’s say, first of all, I have question about what the CFPB’s authority is to compel the production of data. I mean, the FTC, I think has limited authority to compel production of data, it has to do with 6(b) study. And then I think those, I don’t know the exact terms of the law, but that gives it some authority to compel data. 

But secondly, so let’s say the CFPB, you know, does this, gets this data, and finds out that these companies are using data from their payment system to inform their behavioral advertising? So, what can they do about? Well, I get the impression that Rohit Chopra doesn’t like behavioral advertising, but so what?

Adam White:

Tom, before I answer that, let me just clarify really quickly when I threw out a citation earlier, I think I got it wrong. The CFPB’s authority over payments specifically is Section 1002 of the Dodd-Frank Act. The number I threw out a few minutes earlier goes to the heart of this question, where does the CFPB get authority to demand this information? Well, under Section 1022 of the CFPB Act part of Dodd-Frank, they have authority to make rules. And so, when they issued this order to the tech companies, they invoked their rulemaking power. So technically, very specifically speaking, this order for information is ostensibly an adjunct to their rule making power. And the CFPB is collecting information so that it can prescribe general rules going forward, regulating the payment practices of these companies and other companies that might provide similar services. But of course, surely it must be the case that the CFPB is obtaining this information for a variety of purposes. It could give rise to subsequent enforcement actions by the CFPB. It could give rise to the CFPB trying to name and shame bad practices and so on. So, I’m sure the CFPB has a variety of purposes, but technically speaking, it’s gathering this information for the sake of future rulemaking.

Tom Lenard:

Which, if they were to do that, they would have to do under normal APA procedures. Is that right?

Adam White:

That’s right. They’d have to go through… I mean, well, sometimes agencies try to get around that. They try to use so-called guidance documents and so on, but, to the extent that the CFPB honestly is doing this for the sake of rulemaking, they’d have to go through a notice and comment process. But before you begin the notice and comment process, the agencies do have to begin from a certain set of information. Now, the CFPB has a variety of technical tools. Again, they could use enforcement and other things. They do have, if I remember correctly, some form of equivalent of subpoena power over some sources of information, I’m now getting a little hazy. So, I better stop short of getting too specific, but here it really tied specifically to their rule making power.

Tom Lenard:

So, if they proposed a rule which dealt with the use of data, I guess, from the payment platforms, but it presumably, it would be more general than that for the use of advertising and place restrictions on that. That’s pretty close to FTC land, isn’t it?

Adam White:

Yeah, very, very close. It would have to be, as I understand that, the CFPB would only be able to promulgate rules on advertising, really specific to advertising about payment services. But again, as it’s kind of reminiscent of the 1990s fight about Microsoft, where Microsoft had an operating system, but then wanted to integrate in Internet Explorer, the original Microsoft web browser. Here, where Apple, Google, and others, Amazon, are integrating payments into a variety of services, right? Then it gets more complicated. Less so with PayPal and Square, where they really are sort of specifically payment service companies. I mean, they’re more complicated than that, but first and foremost, payments. For the other companies, which not coincidentally are the companies that tend to be at the center of sort of the broader tech fights, Amazon, Facebook, Apple, and so on, you really do have the FTC and the CFPB in the same lane.

And I suspect you’ll see a lot of joint action from those companies. You could see a joint rule making, for example. Well, it gets complicated with the FTC, as you know, they have their rule making powers complicated, but it’s not beyond the realm of possibility. You could see the CFPB, FTC, or others moving forward on some joint regulatory actions where the CFPB would nominally be responsible for one small part of it though its lane, and the other agency would be responsible for its part of its authority, but where in fact, these things are very, very blended as a whole. Again, I mean, part of the irony here is the CFPB was created ostensibly to be independent, right? To just go do its job. But as we’ve seen in recent eras, and it’s not limited to the Biden administration. We’ve seen this. We saw it with the Trump administration. We saw it with the Obama administration, more and more coordination among the independent agencies and the executive agencies. 

So, here you have the CFPB surely in regular communications with the FTC. And again, as you mentioned, the CFPB director is newly arrived from the FTC and has sort of tried to keep a hand on the FTC’s business, even after his departure. Surely, also in coordination with the White House, where issues of tech competition and consumer protection have been a central part of the White House’s own priorities, as we’ve seen in some executive orders and surely with the involvement of professor Tim Wu, one of leading sort of intellectuals in these areas of Columbia law professors at the White House. This is all part of a cohesive whole, which in some ways defeats the purpose of having an independent CFPB and an independent FTC.

Sarah Oh:

That’s a good segue to maybe the Henderson v. The Source for Public Data case where Rohit Chopra and Lina Khan, Director and Chair, they put out a joint public statement from the CFPB and the FTC talking about how it’s important for the companies to not claim Section 230 immunity from consumer and banking laws to circumvent those laws. That raised questions to me that they’re entering into Section 230 talk together. Could you tell us a little bit more about that case and what’s happening?

Adam White:

Yeah. This is the case I alluded to just in passing a few moments ago. There was a brief filed jointly in the US Court of Appeals for the Fourth Circuit. So, it’s the states of Maryland, Virginia, North Carolina, and South Carolina. They filed a joint brief, the FTC, the CFPB, and the North Carolina Department of Justice. And they, as you mentioned, I’m sure your listeners are familiar with Section 230 and it is fascinating, right? That suddenly, the CFPB is drawn into the Section 230 fights. Here’s the basic issue in the case. 

As your listeners know, Section 230, the Communications Decency Act, gives interactive computer services, so generally websites, broad immunity from the information for the republishing of information on their platforms. So, when users are able to post say things to Twitter, Twitter is not responsible for copyright violations and things like that under Section 230, because Congress gave them broad immunity. And I’m sure it’s more complicated than that. I may have misstated to the margins, but in general, Section 230 has a broad immunity provision for these interactive websites. 

Well, the Source for Public Data, as I understand it, is a website that gathers a lot of information related to people’s credit worthiness. So, it’s everything from credit data to public records on criminal histories. They obtain this information, as I understand it, they purchase a lot of this information, they combine it together on the website, these various data streams. Well, the question in the Henderson case is are they entitled to Section 230 protection? Are they an interactive computer service? And if so, are they immune from liability under this other body of law, the Fair Credit Reporting Act. 

The trial court that first heard the case, I guess it was the Eastern District of Virginia. So, right across the Potomac River from Washington. The trial court concluded that the Source for Public Data is an interactive computer service that’s entitled to protection under Section 230. And furthermore, that protection immunizes the Source for Public Data against liability under the Fair Credit Reporting Act, and under that act, they might have been susceptible to liability if they were not taking care to ensure that the information they were sharing about people’s creditworthiness was accurate. And there was disputes about whether, I think it was some of the criminal information that was being incorporated into their dataset, was accurate or not. The trial court said, “Yes, you’re immune, the Source for Public Data is immune to FCRA liability because Section 230 is broad immunity. It has a small handful of exceptions. It does not include the credit law in that set of exceptions. So, therefore, the immunity trumps the Credit Act.” 

So, this is where the CFPB comes in. The Fair Credit Reporting Act is one of the statutes that the CFPB is by statute now authorized to enforce. It preexists the CFPB. The CFPB inherited that statute. And you have the CFPB, the FTC, and these North Carolina regulators filing a brief together in the Fourth Circuit saying the trial court got it wrong. That what the Source for Public data does is not just obtain and republish information. It’s not a sort of a passive, pass-through entity. It actually seeks out information, purchases, it incorporates it together, and so it does much more than just the mere interactive computer services that are at the heart of Section 230. So, it’s a complicated case, and I’m sure your listeners can point out details I maybe got wrong along the way. Hopefully not. But the core issue, again, is interesting CFPB involvement in an issue, Section 230, that normally goes beyond its bounds, but because its bounds are so broad and bump up against so many other areas of law, you suddenly have the CFPB with its authority over credit involved in this now years-long fight over the meaning of Section 230 and jointly with the FTC.

Tom Lenard:

The FTC used to have the Fair Credit Reporting Act.

Adam White:

Yeah, that’s right. The creation of the CFPB solved maybe some problems as many see it but created others by complicating the border between the CFPB and at the FTC. Now it’ll be interesting to see how this case plays out. It’s really less about the Fair Credit Reporting Act. It really is a case about the meaning of Section 230. And I don’t think the Fourth Circuit is going to give a whole lot of deference to the arguments of the CFPB, since the CFPB is not really one of the agencies to whom Section 230 is committed. So, they’re really an outside observer, unlike perhaps the FCC, if it gets involved in this case. And I don’t know if it’s filed an Amicus brief in this case, but you know, the irony here is that the CFPB has been pushing its bounds for so long, really treading sometimes on territory that might be better left to state regulators or others. It’s sort of the height of irony now to see the CFPB a decade into its existence, complaining that other agencies or other statutes are encroaching on its turf. That’s a total reversal of roles for the CFPB, which has been very content to try to eat others’ lunch for about a decade. 

Tom Lenard:

Now, just as an aside, I heard a former FTC Commissioner, sometime after the CFPB was created, saying that the FTC lost, at least in the consumer protection area, its most important function when the Fair Credit Reporting Act was given to the CFPB.

Adam White:

Yeah, you wonder how much Congress thought about that at the time in 2010. Obviously, the financial crisis was right in the rear-view mirror. There was a huge push to create, not just the CFPB, but the Financial Stability Oversight Council. Another statute on what was called orderly liquidation, it was a bankruptcy provision. You had things, you know, push over the Volcker Rule, right? The role of banks in taking deposits but also investing. You had any number of issues, and honestly, the transfer of authority of the Fair Credit Reporting Act over the CFPB was part of just a laundry list of more than a dozen, I think, statutory authorities to the CFPB. And so, it’s not clear to me how thoughtful this was on the part of Congress and certainly not clear whether they would like to have it this way now, and you know, 10 years later it might be the right time to go back and revisit.

I mean, I definitely think it’s the right time to go back and revisit Dodd-Frank. And when they do, I think this will be a good question to ask. “Is it time to maybe rethink the particular bundle of statutes that the CFPB enforces to the extent that it made sense in 2010?”

And I don’t know that it did, but to the extent it made sense in 2010, it might not make sense now, where the key issues have changed, and we’re focusing primarily on tech companies, and it’s not clear that a coherent regulatory framework as Dodd-Frank’s framers saw it a decade ago, is necessarily a coherent regulatory framework for tech issues today, which really are front center in American life. 

Tom Lenard:

Let me just try to clarify something you said before to make sure I’m understanding it correctly. You were saying that they could investigate the use of data from payment systems for advertising of payment systems, but not more generally?

Adam White:

As I understand it, you’re right. The CFPB’s mandate doesn’t run to tech companies advertising or publicly offering their services generally. The CFPB’s mandate goes just strictly to the financial services that are offered to consumers by these companies. 

Tom Lenard:

You might not get that impression from reading the press release, but anyway…

Adam White:

That’s a fair point, and again, I think that’s a symptom of both the CFPB never being shy about pushing its boundaries. But also, the CFPB now getting involved with companies that offer a variety of very different, but very deeply intertwined bundles of services, right? So, payment services in conjunction with everything else that the tech companies are offering.

Tom Lenard:

Of course, given the unpopularity of the tech companies in Congress and elsewhere, they may all be cheering them on. 

Adam White:

That’s true. I’d say at this given moment in time, most likely the only part of government that’s going to rein in this effort by the CFPB would be the courts, to the extent that the CFPB is stepping beyond its laws, and here, maybe to pull in another theme, the CFPB and other agencies in the Biden administration are about to start bumping into what I think will be real headwinds in the federal courts. The federal courts, not just with the last round of appointments by President Trump, but also the generation of judges appointed by President George W. Bush, have made very clear year in decisions that this generation of judges is much more skeptical of broad assertions of power by agencies on some of what we often call in this area of law, the major questions of American law and policy. And when an agency suddenly asserts broad powers over a set of companies or issues or individuals not traditionally within its jurisdiction, this new generation of judges informed by Justice Thomas, and Gorsuch, and others, tends to express skepticism.

We’ve seen that already in a few early decisions. The Biden administration’s rulemaking process, by and large, has been a little slow to get started; I think in part because the agencies, and this isn’t just the CFPB in the FTC, but in general, the agencies, I think recognize they’re going to be facing headwinds. And they’ll probably try to paper up their rules as much as possible with information and data and legal arguments. But next year in 2022, as we see a lot of these major rules coming out of the agencies, I think they’re going to face real scrutiny in the courts. 

The CFPB, if it’s just gathering information on these issues now will be maybe in the second wave of major rules that come out of the agencies after what we’re seeing out of the EPA and others, but the CFPB is going to face, I think very similar challenges in court to the extent that it tries to push beyond the generally understood limits of its authority. It’s not to say it’s going to lose the cases. It’s just to say, it’s going to have to work pretty hard to win the cases. 

Tom Lenard:

Well, there’s no, in terms of the Biden administration and regulation, there’s no OMB director, there’s OIRA director. I realize that CFPB and FTC rules don’t go through OIRA, but I guess it’s a slow appointments process.

Adam White:

It is, but I will say it’s very, very interesting to see the OIRA seat go unfilled. This is the White House regulatory oversight position. President Biden from his very first moments in office made clear, and in some of his pronouncements and orders, that he wanted a fundamental rethink of the regulatory process and the way in particular that the regulatory process handles issues of equity and justice and other considerations. And to see this OIRA seat go empty for so long is very, very interesting. Now, again, the Biden administration has also prioritized consumer protection and these issues of the power of large companies and large tech companies. And so, it’s doubly interesting then to see the CFPB’s regulatory process moving a little slowly. I mean, this is a pretty bold order, to say the least, from the CFPB director, but it’s a bold order, nine, ten months into the administration. And the fact that the CFPB is only now sort of getting moving is very, very interesting. A presidential term is just four years. Maybe President Biden will get reelected, but you do… Every administration tends to have a sense of urgency in its first year, knowing how quickly its time might go, and to see the CFPB picking up on such a bold agenda item just a year into the administration is, is very, very interesting,

Tom Lenard:

Well, Chopra has only been in there for whatever it is, a month or so.

Adam White:

Right. That’s right. 

Sarah Oh:

So well, on that note, we’ll have to keep watch for 2022, and watch the federal courts, watch what the CFPB does, and if there is oversight from Congress. And we’ll have to have you back on, Adam. Thank you so much for your time. 

Tom Lenard:

It was a pleasure. It was very interesting. 

Adam White:

Well, thanks Tom. Thanks Sarah. It’s a pleasure to be here, and I’ll gladly be back anytime. Thank you very much.

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