This bill increases transparency in the CFPB's rulemaking process by requiring detailed cost-benefit analyses and justifications for proposed regulations.
Barry Loudermilk
Representative
GA-11
The "Transparency in CFPB Cost-Benefit Analysis Act" requires the Consumer Financial Protection Bureau (CFPB) to include more detailed information and analysis in its proposed rulemaking notices. This includes explaining the need for the regulation, assessing its costs and benefits (especially for small businesses), examining alternative approaches, and justifying the regulation's impact. The bill aims to ensure greater transparency and accountability in the CFPB's regulatory process.
CFPB Rulemaking Gets a Magnifying Glass: New Bill Demands Deep Dives on Costs, Benefits, and Alternatives
This legislation, the "Transparency in CFPB Cost-Benefit Analysis Act," proposes significant changes to how the Consumer Financial Protection Bureau (CFPB) develops new rules. It amends the Consumer Financial Protection Act of 2010 to mandate a much more detailed analytical process before the Bureau can even publish a proposed regulation. The core idea is to force the CFPB to rigorously examine and publicly disclose the potential impacts of its actions, aiming for greater transparency.
Under the Hood: What the CFPB Would Need to Prove
Before issuing a notice for a new rule, the bill requires the CFPB to jump through several new hoops outlined in the amended Section 1022(b). They'd need to justify why a regulation is necessary and why existing rules or other agencies can't handle the issue. The Bureau must also check if the proposed rule clashes with other federal regulations and, if so, explain why it's still needed and how they'll minimize conflicts. Crucially, the CFPB would have to conduct a deep dive into all expected costs and benefits – covering direct and indirect effects, compliance costs for businesses (with a special eye on small businesses, requiring consultation with the Small Business Administration if costs increase), broader economic impacts, and the government's own regulatory costs. They'll also need to identify and analyze "reasonable alternatives" and justify their chosen path, especially if the quantified benefits don't clearly outweigh the costs or the benefits of alternatives. Furthermore, the analysis must assess how the burden is distributed, particularly if consumers or small businesses are disproportionately affected, potentially using statistical methods to show likely outcomes, and citing all data and studies used.
The Balancing Act: More Scrutiny, But At What Pace?
These changes represent a significant increase in the analytical workload for the CFPB. On one hand, this could lead to more thoroughly vetted regulations. Supporters might argue this ensures rules are based on solid evidence, considers potential economic drag, and prevents regulatory overlap, potentially leading to smarter, less burdensome rules for everyone, especially small businesses trying to navigate compliance. However, this level of detailed, pre-emptive analysis could also significantly slow down the rulemaking process. Imagine the CFPB identifying a harmful new financial product targeting vulnerable consumers. Under this bill, before proposing a rule to stop it, the agency would face a lengthy process of detailed cost calculations, alternative considerations, and justification writing. Critics might worry this adds bureaucratic hurdles that could delay or even prevent timely consumer protections, particularly for issues where the benefits (like preventing future financial distress) are vital but harder to quantify in dollars than the compliance costs for industry.