Consumer Financial Protection Bureau employees could see their salaries fall by as much as 25 percent under Republican legislation that would alter the agency’s pay scale.
House Financial Services Committee Chairman Jeb Hensarling’s (R-Texas) Financial Choice Act would shift the CFPB’s 1,600 employees from the more generous Federal Reserve Board scale to the General Schedule that applies to most federal agencies.
A pay scale reclassification would amount to “a significant cut,” Lucy Morris, a partner at Hudson Cook, LLP in Washington who served as CFPB deputy enforcement director in 2011-14, told Bloomberg BNA.
“I believe that would impact certain employees and their desire to stay,” she said. “There are many employees who are dedicated to the mission and would stay.”
The pay-scale reclassification could amount to a 25 percent reduction in the annual salary of a CFPB employee, Tom Pahl, a former CFPB lawyer who is a partner at Arnall Golden Gregory LLP in Washington, told Bloomberg BNA.
“If you were to see a 20 to 25 percent drop in the pay of an existing employee, I think people would give some thought as to how well they could do with other options—a private law firm, for example,” he said. “Going forward, I think it would have more of an effect on an ability to recruit.”
Before his stint at the CFPB in 2013-15, Pahl worked at the Federal Trade Commission, including 10 years as a manager when he was involved in hiring employees under the GS scale.
“You can get good people at the GS scale,” he said. “There may be some circumstances where competing against banking institutions and law firms could be hard, for some real competitive candidates.”
Banking Regulators Exempt
The House Republican attack on the CFPB pay scale predates Hensarling’s bill. In the 113th Congress, Sean Duffy (R-Wis.), introduced the CFPB Pay Fairness Act of 2013, which won committee approval and was incorporated into a larger bill that passed the House in 2014 but died in the Senate, then under Democratic control. Duffy’s language on the pay scale was later folded into Hensarling’s Financial Choice Act.
The pay-scale bill drew little attention at a 90-minute hearing in October 2013 on several CFPB-related measures. Daniel Silvers, an AFL-CIO lawyer who defended the CFPB before the committee, was asked by Rep. Andy Barr (R-Ky.) about the CFPB director’s ability to pay better than General Schedule (GS) rates.
“Congressman, all the bank regulators have this ability,” Silvers said. “It’s impossible to be an effective banking regulator without the ability to hire competitively in the banking sector.” Congress has exempted the CFPB, the Fed, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and some other financial regulators from the GS system, resulting in generally higher scales at those agencies.
Another separate, pay-related issue led to two hearings before the committee in early 2014, after news reports of an internal CFPB survey that disclosed younger, white employees received disproportionately more favorable job ratings, and thus bigger raises and bonuses, than their older, non-white colleagues.
Hensarling Readies New Bill
Hensarling’s bill will die with the end of the 114th Congress this year, but he has said that he will propose a version that closely tracks the 2016 version after the next Congress convenes in January and will be joined in the White House by a Republican, Donald Trump.
Congressional Republicans have directed steady fire at the CFPB almost since the passage of Dodd-Frank in 2010 in response to the financial crisis. The bureau’s Democratic supporters argue it’s necessary to police big banks and financial services and combat abuse of consumers. Its detractors accuse the CFPB of regulatory overreach that stifles businesses.
The Financial Choice Act would rechristen the CFPB as the Consumer Financial Opportunity Commission and place it under a five-member commission instead of the sole, independent director who now oversees the agency. It would bring the agency under the congressional appropriations process; the agency now is funded outside that process, through the Federal Reserve Board.
The act would subject proposed regulations to a stronger cost-benefit analysis and to review by Congress. It would charge the agency with promoting free-market competition, and it would roll back proposed or approved rules on payday lending and arbitration clauses in consumer contracts.
By Gregory Roberts