"The vast majority of the (advisory board's) business is conducted in sessions that are closed to the public"
—Community Financial Services Association of America
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Opaque Operations

The Consumer Financial Protection Bureau states that “Transparency is at the core of our agenda, and it is a key part of how we operate.” Yet, much of the agency’s rulemaking process and activities (including a wide-reaching data collection program) remain shielded from public scrutiny.

Reducing FOIA Information

A document, “Recommended Calendar Dos and Don’ts” obtained by the group Cause of Action revealed in June 2013 that the CFPB instructed employees to reduce the number of details regarding agency events described on calendars subject to Freedom of Information Act (FOIA) requests.

The handout tells employees to “keep your calendar entries brief and general. If possible, avoid annotating entries with agendas, detailed discussions, etc.” The implied goal of the handout is to reduce the amount of information that can be gathered by a FOIA request, effectively reducing the level of transparency surrounding agency activities.

Secretly Planting Audience Members at CFPB Hearings

Douglas Lane, a radio host and outspoken critic of certain auto lending policies, participated in a 2013 CFPB public forum on indirect auto lending. What audience members and participants didn’t know was that the CFPB paid for Douglas to attend the event.

Federal agencies regularly pay for witnesses to travel and testify at their hearings, but usually those witnesses are part of an official panels, separate from audience members. That connection makes it clear who is a recognized agency witness.

In an interview with American Banker, the CFPB’s witness, Lane, said: “They paid my way up there. I flew in the night before, they put me in the Club Quarters, they paid for the whole nine yards…They wanted me to be there.”

In response to questions of why the agency failed to disclose the connection publicly, a spokesperson said it was because Lane’s role was “limited.”

Closing Public Meetings

Investor’s Business Daily has detailed the tendency of CFPB’s Consumer Advisory Board to deny public access to what are supposed to be public meeting sessions. The Federal Advisory Committee Act prohibits the CFPB from meeting with top CFPB officials in secret, but the Community Financial Services Association of America says its representatives were denied access to those meetings. In response, the CFPB pointed out that the agency’s charter states it can close meetings or portions of meetings for “confidential discussions,” but an analysis of the meeting minutes found no indication that confidential business was discussed. The CFPB also did not disclose in the Federal Register that the meetings would be held in closed session—a requirement under federal law.

The Bipartisan Policy Committee has also noted that the CFPB’s approach to public meetings is “inconsistent with the CFPB’s stated goal of full transparency.” In a review of the Federal Register, the report’s authors found that the CFPB had not published notice of any of its meeting in the official journal of the federal government. In at least two cases, the CFPB failed to provide any advance notice of hearings that were supposed to be public, effectively shutting out public participation in its policymaking process.

Ex Parte Communications

Like other federal agencies, the Consumer Financial Protection Bureau consults with outside individuals and groups regarding potential rulemakings outside of the traditional public comment period. In an effort to encourage transparency, the CFPB issued a policy on these communications requiring that stakeholders make a written copy of the presentation or remarks available to the CFPB within three days of communication. The CFPB will then post a summary of those communications, known as ex parte communications, on the federal register site.

Limiting CFPB’s openness, the agency will not post these communications online until after a proposed rule regarding those comments is published on the agency’s website. The public is not privy to correspondence between the CFPB and outside stakeholders while CFPB staff are gathering information and formulating rules.

The CFPB’s guidance on ex parte communications also allows the agency to modify its policy of transparency whenever it sees fit.

Communications with elected officials also do not have to be summarized or posted unless they add significant new information that influences the CFPB’s rulemaking or decisions.

Lack of Rulemaking Transparency

“At the beginning of a rulemaking process, CFPB staff will typically receive suggestions and information from a variety of stakeholders. This input will help inform the drafting of a proposed rule. For example, the CFPB is currently gathering public input on mortgage disclosure forms in its “Know Before You Owe” project and on how to define a “larger participant” for its non-bank supervision program. The ex parte policy does not apply during this stage of the process, which is before a rule has been proposed.”

The CFPB has been given broad authority under the Dodd-Frank Act to regulate financial institutions based on thorough research and in consideration of public comments. Though the agency is still young, complaints have been made regarding the agency’s methodology.

“The CFPB’s proposal is a noxious attempt to solve a problem that doesn’t exist and is likely to make a mess of one part of the consumer-loan industry that works.”
—Rep. John Campell (CA-45) in The Wall Street Journal

The most notable example of the agency’s lack of transparency in rulemaking is the regulation of the automobile credit market. In March 2013, the CFPB issued a set of rules that would change the way automobile dealers are compensated for providing vehicle purchasers with financing options.

In its report, the CFPB claimed that there were racial and socioeconomic disparities in the way auto loan financing options were offered by car dealers and created rules to “fix” that disparity. Criticism of the CFPB’s action was swift from both parties in Congress.

Democratic members of the House Committee on Financial Services sent a letter to CFPB Director Cordray seeking information on the “methodology the CFPB has adopted to determine whether fair lending violations exist.” Rather than fully responding to the questions posed by members of Congress, Cordray’s response explained the use of “proxy methodology” and commented that the agency “considers appropriate analytical controls in reviewing data to determine whether a specific policy results in unlawful differences on a prohibited basis.”

Thirty-five Republican members of Congress sent a letter to the CFPB requesting details regarding the agency’s methodology for determining both the background of certain borrowers and any pricing discrepancies. The letter stated that “it appears to us that a loss to consumers would occur if the CFPB uses its supervisory and/or enforcement authority to weaken the intense competition that results from the ability to negotiate with the dealer to obtain financing terms that are more competitive than the best terms the consumer can secure from any other source.”