Republicans to CFPB: Hands off Insurance
Legislation filed in Congress for a sixth time would formalize that regulation of insurance companies must be left to the states.
Like clockwork, Republicans in Congress this year have reintroduced legislation to reaffirm that the Consumer Financial Protection Bureau (CFPB) must stay out of the state-regulated insurance industry.
This will be their sixth attempt to advance the bill into law over the last decade, though there are at least some signs that they might have a better chance in 2025.
This can be considered another battleground in the political war over the agency, which White House Office of Management and Budget Director Russ Vought asserted in October could be closed in full within a matter of months.
Established in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB was designed to consolidate consumer protection responsibilities that were previously scattered across multiple federal agencies. Future senator Elizabeth Warren, then a Harvard Law professor, in 2007 had proposed creating a commission that would protect the financial interests of consumers like the Consumer Product Safety Commission safeguards the American public from physical goods used in everyday life.
Officially, the CFPB’s mission is to enforce federal consumer financial laws and ensure that markets for applicable products are fair, transparent, and competitive. The bureau has authority over a wide range of financial products and services, including mortgages, credit cards, student loans, and payday loans. It can write rules, supervise companies, enforce laws, and handle consumer complaints.
The CFPB has been controversial in Washington, D.C., since its creation, with supporters (mainly Democrats) crediting it with returning billions of dollars to consumers and critics (mainly Republicans) arguing it has too much power with insufficient oversight. In written testimony to the House Financial Services Committee in June 2024, then-CFPB Director Rohit Chopra said the agency had saved financial customers $20 billion in junk fees every year and processed 2 million complaints in 2024 alone.
Nonetheless, Republicans in Congress remain wary of the CFPB, in line with the party’s distrust of additional federal regulation, and because the agency is funded directly through the Federal Reserve rather than the regular appropriations process. Congress asserts its control over federal spending through annual appropriations, using that power as a check and balance on agencies. Republicans especially like this tactic because agency heads must defend their budgets to committee members each year.
While the CFPB generally does not regulate insurance, it can act against insurance companies under specific circumstances, such as when they engage in deceptive or unfair practices related to non-insurance financial products or services like premium financing or financial advisory services. Additionally, the CFPB has authority to enforce several laws, including the Fair Credit Reporting Act and the Fair Debt Collection Practices Act. If an insurance company violates one of these laws, the CFPB can issue fines and other penalties.
The CFPB has conducted anywhere from less than 10 to nearly 60 enforcement actions annually, though it was not immediately known how many involved insurance companies. In one instance, more than a decade ago, the agency fined four mortgage insurance companies for allegedly engaging in kickback arrangements with lenders by purchasing captive reinsurance that the agency deemed worthless. In addition to paying over $15 million in fines, the four companies were barred from entering into any new captive mortgage reinsurance arrangements for 10 years.
Consumers can also submit a complaint to the CFPB via its website about problems related to a financial product or service associated with an insurance company. The CFPB forwards the complaint to the company and seeks a response. This process can be used for mortgage-related insurance, along with disaster-related and coverage issues.
Introduced for the sixth consecutive Congress, the Business of Insurance Regulatory Reform Act (HR 4735 and S 2419) would clarify that the CFPB cannot exercise authority over entities engaged in the business of insurance, even if those entities offer products or services that are subject to other consumer financial protection laws. Instead, state insurance regulators must continue to oversee the insurance industry.
Republican sponsors believe this legislation would better codify the CFPB’s boundaries and hold it to the same standard as the Federal Insurance Office, which has no regulatory authority over the state-regulated insurance industry.
Both the House and Senate versions of the bill were introduced in July and referred to committees. There has been no action on either since then. Still, it’s worth noting that the lead sponsor of the Senate bill is Senate banking committee Chairman Tim Scott (R-S.C.), whose panel has the legislation. Perhaps this is the Congress that the legislation moves.
