The rules for monitoring the financial products used by consumers are too subjective, Republican U.S. lawmakers said Thursday at a hearing with the recently appointed director of the federal government’s new watchdog.
The Consumer Financial Protection Bureau, created by a larger financial-overhaul law, is charged with protecting individuals from unfair, deceptive, or abusive acts and practices, among other directives. But this standard is too vague, charged Rep. Spencer Bachus, a Republican of Alabama and chairman of the U.S. House Committee on Financial Services. For example, he said, consumers have different levels of financial knowledge.
“In some cases, the ability of a consumer to understand” could determine whether a product is below the CFPB’s standard, Bachus told Richard Cordray, the CFPB’s director.
Rep. Jeb Hensarling, a Republican of Texas, voiced a similar concern about the standard. “Is it clear or is it subjective,” he asked. “Is it clearly subjective?”
Cordray said the CFPB’s guidelines speak about taking unreasonable advantage of consumers. “Good businesses and good banks are mindful of this,” and don’t approach certain customers with certain products. “It’s not one size fits all.”
However, he added that when it comes to gray areas, the CFPB “should tread cautiously.”
In response to questioning from another lawmaker about consumers’ personal responsibility, Cordray said individuals need to be reasonable and accountable, and that the CFPB can try to help them make better-informed decisions. “They’re the ones that have to live with those decisions.”
The CFPB began operating in July, and President Barack Obama appointed Cordray as director in January. His appointment was contentious — Obama appointed him during a recess after opposition from Republicans.
Cordray appeared Thursday before the House committee to detail the bureau’s early progress. During the CFPB’s first six months, it worked on resolving credit-card and mortgage complaints from consumers, starting a financial-institution supervision program, and developing straightforward financial-product disclosures, among other steps.