It has been reported in the popular press that President Obama sharply criticized a major bank for imposing a $5 per month charge to make up for the loss of interchange fees resulting from the Durbin Amendment to Dodd-Frank. He said that this is why we need the CFPB, implying that the CFPB could prohibit or limit such fees if it wanted to do so.
This drew a more temperate response from Raj Date at the CFPB in which he indicated that the CFPB could regulate the way banks disclose checking account fees. He did not take the bait from the President and said nothing about the CFPB’s power to prohibit or limit fees on checking accounts. The President later seemed to backtrack from his original comment and he now hopefully understands that Dodd-Frank does not authorize the CFPB to prohibit and regulate checking account fees.
Once the CFPB has a Director (and who knows when that will happen), the CFPB can issue regulations proscribing unfair, deceptive or abusive acts or practices. The Truth in Savings Act and Reg. DD promulgated thereunder already require banks to clearly and conspicuously disclose all deposit account fees. With all of the attention being focused on the banks that have imposed monthly fees to make up for the revenue shortfall resulting from the Durbin Amendment, there is certainly no need for any additional disclosure requirement. In his silence on the issue of limiting or banning fees, Mr. Date was obviously aware that the authority of the CFPB to do so under Dodd-Frank is highly questionable.
This brouhaha underscores the need for Congress to make structural changes to the CFPB so that there is a commission rather than a single director who calls the shots at the CFPB. While we don’t know Richard Cordray’s position on this issue, it is downright scary to think that one individual (regardless of political persuasion) on his or her own could set policy based on an extreme interpretation of Dodd-Frank (i.e., that it authorizes the CFPB to set prices) which could have a draconian impact on banks, consumers and the economy.
If President Obama had not made an issue out of the monthly checking account fees, it is unlikely that the Republicans would confirm any Director. This dust-up is likely to make it even more difficult for the President to get Cordray or anyone else confirmed as a Director.