CFPB Rulemaking Cost-Benefit Act

Summary#

The Transparency in CFPB Cost-Benefit Analysis Act would amend the Consumer Financial Protection Act of 2010. Its stated goal is to add analysis and disclosure requirements when the Consumer Financial Protection Bureau (CFPB) proposes a rule. The bill is not law; it has been referred to the House Committee on Financial Services. The parent Act was not supplied, so I could not verify how these requirements compare with current law.

  • For each proposed rule, the CFPB would have to publish the notice in full in the Federal Register and include an explanation of why the rule is needed and why private markets or state, local, or tribal authorities cannot adequately address the problem.
  • The CFPB would have to assess whether the proposal duplicates or conflicts with other federal rules. If it does, the CFPB would have to explain why the rule is justified, how it could coexist with existing rules, and how it plans to reduce the added burden.
  • The CFPB would have to assess expected direct and indirect costs and benefits, including effects on regulated entities (including small businesses), the economy, competition, capital formation, government implementation costs, and state, local, and tribal entities. It would also have to identify alternatives and assess how burdens are distributed.
  • If the CFPB determines a proposed rule would increase costs for small businesses, it would have to consult the Small Business Administration’s Office of Advocacy about ways to reduce those costs.
  • The CFPB would have to explain the assumptions, studies, and data behind its analysis, including whether studies were peer-reviewed. When feasible, it would also have to provide a probability distribution of relevant outcomes.

What it means for you#

  • Consumers and businesses: The bill does not directly change consumer rights, business rules, fees, or penalties. It would require more analysis and explanation before the CFPB issues a proposed rule.
  • Small businesses: If the CFPB determines a proposal would increase their costs, it must consult the SBA’s Office of Advocacy. The bill does not give businesses a new application or appeal process.
  • CFPB: The Bureau would have new duties for every proposed rule. If its analysis finds that quantified benefits do not outweigh quantified costs, or that alternatives have greater quantified net benefits, it must justify the proposal; the bill does not say the CFPB must abandon it.
  • State, local, and tribal entities: The CFPB’s analysis would have to include costs imposed on these governments. The bill does not require them to be consulted.
  • General public: The bill does not create a new service, benefit, or independent agency.

Money#

No publicly available information on implementation costs or staffing.

  • The bill does not provide an appropriation or cost estimate.
  • The CFPB would have to do additional analysis, and sometimes consult the SBA’s Office of Advocacy. The bill does not say how much staff time or money this would require.
  • The bill does not impose a fee or fine.

What is unclear#

  • The bill does not set methods, standards, or deadlines for the required cost-benefit analysis, or say what happens if reliable data are unavailable.
  • It does not define terms such as “adequately address,” “duplicative,” or “probability distribution.”
  • Two references in the text appear not to match the listed requirements: the alternatives analysis points to the cost-benefit clause rather than the alternatives clause, and one test of quantified benefits points to the duplication clause. The intended references are unclear.
  • The bill does not explain how its new requirements would interact with existing CFPB rulemaking requirements; the parent Act was not provided for comparison.

Case for#

  • A possible argument for the bill is that the public should be able to see why the CFPB believes a rule is needed and what costs and benefits it expects.
  • Comparing a proposal with alternatives and existing federal rules could help reveal avoidable overlap or burdens.
  • Consulting the SBA’s Office of Advocacy when the CFPB expects small-business costs could bring those costs into the Bureau’s analysis.
  • Explaining assumptions and identifying studies could make it easier to assess the basis for the CFPB’s forecasts.

Case against#

  • The required analyses could add work and expense for the CFPB, but the bill gives no estimate of that burden.
  • The bill requires the CFPB to justify some proposals when quantified benefits fall short; it does not say how much weight qualitative effects should receive in that justification.
  • Terms and cross-references that are unclear could make it harder to apply the requirements consistently.
  • The bill does not require the CFPB to change or withdraw a proposal when its analysis identifies higher costs or a better-performing alternative.