Credit Scott, Hill, And Trump For Nullifying Harmful CFPB Regulations

This week, President Trump signed two Congressional Review Act resolutions nullifying bad Biden-era Consumer Financial Protection Bureau regulations. The signing caps the efforts led by Senate Banking Chairman Tim Scott (R-SC) and House Financial Services Chairman French Hill (R-AR).

The CFPB will not be able to issue “substantially similar” rules in the future, and this trio (and their staff) deserves credit for delivering the win to millions of Americans.

The first CRA resolution nullifies the CFPB’s overdraft rule, a regulation that would have imposed price caps on overdraft fees. As Senator Scott pointed out in March, price caps would have reduced a service millions of people find valuable and kept more people out of the banking sector.

Price caps prevent companies from earning the profit they need to provide products and services to customers. As a result, companies stop providing those services and/or charge other people higher prices. Either way, they lessen people’s ability to make their own choices.

Price caps are also anticompetitive because they remove the incentive for other companies to provide similar services. This feature lessens consumer choices, too, but it also suppresses employment opportunities. It makes the free enterprise system less productive and beneficial.

Government Regulations Take Over Markets

The CFPB’s rule was a classic case of bureaucrats deciding that prices were “too high” and then implementing a “solution” that would have made the situation worse. In no time, politicians would likely have been spinning the results as a “market failure,” justifying more regulation, even though the government would have been preventing the market from working in the first place.

The second CRA resolution nullified a rule that would have expanded the CFPB’s oversight authority in digital consumer payments. (Formally, it was the Defining Larger Participants of a Market for General-Use Digital Consumer Payment Applications rule, a bit of a mouthful.)

Arguably, this rule was little more than the Bureau’s attempt to regulate companies like Google and Apple because, well, that’s what regulators do. They regulate. And when they don’t have enough to regulate, they find more to regulate. Regardless, the proposed rule unequivocally failed to justify new regulation or even identify any specific risks posed to consumers by popular digital payment apps.

Limited Government Protects Consumers

The rule did not identify any consumer harm, much less a market failure. Indeed, the digital payment app universe has been a success story, and the rule essentially said, “Congratulations on your successful business ventures; now we’re going to make your lives miserable.”

That’s not how a free enterprise economy works, it’s how a government kills one.

Even fans of limited government concede that government has a legitimate role in mitigating fraud and rectifying true market failures. But regulating for the sake of regulating is counterproductive, and the existing framework already goes way beyond policing fraud and consumer harms.

Obviously, the United States has reached a regulatory saturation point, and financial markets are just one great example.

Financial regulations are complex and voluminous. They sustain the careers of some of the best-paid lawyers and lobbyists in the nation. They’re enforced by, among others, the Federal Trade Commission, the Securities and Exchange Commission, the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration, the Consumer Financial Protection Bureau, and the Federal Housing Finance Agency.

Regulations Have Become Counterproductive

The complicated financial regulatory framework is not a success. It protects incumbent firms, exacerbates instability, and inflates costs. Layers of redundant regulation should be removed, and regulatory functions should be consolidated. Financial firms do not need to be regulated by a dozen federal agencies.

These changes would improve the competitive environment. They would allow both financial and non-financial firms to provide more services to consumers and expand opportunities for people to (directly and indirectly) improve their living standards.

And if members of Congress and the Trump administration want to support “hardworking, entrepreneurial Americans who grow our economy,” they’ll dramatically shrink the existing regulatory system and go even further. Recognizing that freedom and free enterprise are not the enemy, they’ll apply the same principles to the rest of their economic policies.

They’ll avoid policies—including tariffs, trade barriers, price controls on pharmaceuticals, and complicated tax rules—that give bureaucrats more power over people’s lives.

The type and level of government involvement in Americans’ lives currently goes well beyond setting up the rules of the game. In many cases, the government usurps the market and replaces the judgment of private citizens with that of unelected bureaucrats.

Our elected officials have increasingly created the type of paternalistic system that autocratic rulers use to gain power over people, and that trend needs to be reversed. Such a system has no place in a republic built on the principles of limited government and free enterprise, and the sooner Congress and the administration get rid of it, the better off Americans will be.