18 U.C. Davis Bus. L.J. 1 (2017-2018)

handle is hein.journals/ucdbulj18 and id is 1 raw text is: 









       A NEW WAY TO FUND THE CONSUMER FINANCIAL
                        PROTECTION BUREAU

                            CONRAD   Z. ZHONG*


                                 ABSTRACT

       Recent  controversies surrounding the Consumer  Financial Protection
Bureau  (CFPB)  have  revolved around its perceived lack of accountability to
Congress  and  the administration. Notable critics of the CFPB, such as the
Chairman   of the House   Financial Services Committee  Representative Jeb
Hensarling, have characterized the CFPB as a rogue agency. A key legislation
sponsored  by Rep. Hensarling is the Financial CHOICE  Act, which contained
such reforms to the CFPB  as subjecting its entire budget to the appropriations
process. The CHOICE  Act has recently passed the House.
        Though reform of the CFPB is necessary, subjecting its entire budget to
 the congressional appropriation process risks undermining its effectiveness and
 independence as a dedicated federal regulator for consumer financial protection.
 In this paper, I propose an alternative funding solution to reform the CFPB
 without substantively changing its powers and structure: the hybrid funding
 model, with part of the CFPB's budget self-funded and the balance appropriated
 by Congress.
        The hybrid funding model is a pragmatic compromise  that allows the
 CFPB's  valuable  mission to be  preserved  while enhancing  its perceived
 accountability. Under this model, the CFPB will have two types of budget, with
 each earmarked to providingfundingfor certain functions of the CFPB. The self-
funded  budget (the size of which is determined by  the CFPB)  supports its
administrative, operational, and other back-office functions of the CFPB. The
congressional  appropriations budget  (the size of which  is determined by
Congress)  covers costs related to the more politically sensitive activities of the
CFPB, including its research, regulatory, supervisory, monitoring, and
enforcement activities. The hybrid funding solution aims to provide the CFPB
with both agency autonomy and congressional accountability while ensuring that
the CFPB   has a  baseline amount of budgetary resources sufficient for it to
maintain its basic operational needs.

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