The trade group for payday lenders accused the Consumer Financial Protection Bureau of breaking a federal transparency law for advisory councils in a letter sent to the bureau last week.
The Consumer Advisory Board, an advisory council for the Consumer Financial Protection Bureau (CFPB), met last Wednesday and Thursday in California. The meeting agenda listed a scheduled meeting of the entire board to discuss a white paper on "payday loans and deposit advance products."
The Community Financial Services Association of America (CFSA) tried to attend this session of CAB’s meeting, but it was closed to the public and a CFPB official denied them entrance, according to the letter.
The letter says the CFPB broke the Federal Advisory Committee Act (FACA), which "requires that federal advisory committees such as the CAB, with very limited exceptions, conduct their activities exclusively in public."
"We have diligently searched for any provision of federal law that may exempt the CAB from the requirements of FACA, and we can find none," the letter stated.
The CFPB and its advisory board were created in the 2010 Dodd-Frank financial system overhaul, which has been the source of much controversy since its passage.
A CFSA spokeswoman expressed concern about bias in the white paper, which was published on April 24. She called the report "contentious," "incomplete," and "misleading," and indicated that its results were inconsistent with other work published on payday lenders.
"We need to balance the discussion," the spokeswoman said. She noted that several members of consumer advocacy groups hostile to payday lenders are on the advisory board and said there are no members of the industry to balance their perspectives.
CFSA and the bureau have had a strong collaborative relationship in the past, the spokeswoman said.
"We feel strongly that the bureau cannot make proper determinations about these products without complete data, and we want to continue working with them," she said.
A consumer finance law expert expressed dismay at the advisory board’s decision to go into closed session to discuss the white paper.
"I think it’s highly unusual for a consumer advisory council to close portions of a meeting to the public. It’s very unusual," said Alan Kaplinsky, founder and chairman of the consumer financial services group at the law firm Ballard Spahr.
"I don’t know why they would ever go into a closed session. It makes no sense," he said.
The advisory board’s move runs counter to the CFPB’s intention of being a transparent agency, Kaplinsky said.
"They pride themselves on being very, very open," he said.
Kaplinsky said the move to close the meeting is indicative of the bureau as a whole.
"I think they’re transparent when they want to be transparent, and when they don’t want to be, they’re not," he said.
There have been other instances where the bureau has not been as open as it ought to be, Kaplinsky said. For example, the agency has not been very responsive to Freedom of Information Act (FOIA) requests, and the actions of the "Advisory Research Council" have been rather opaque.
The CFPB did not return a request for comment. However, the Consumer Advisory Board’s charter says meetings "shall be open to public observation" unless the board needs to go into "confidential discussion."
The Federal Advisory Committee Act (FACA) sets rigorous requirements for advisory committee transparency, experts say, but the requirements are not foolproof.
Advisory committees have to have a publically available charter and publicly list the names of their members, said Sean Moulton, director of open government policy at the Center for Effective Government. They also have to conduct their meetings open to the public, although he said there are exceptions.
"Unfortunately, there’s a lot of ways around this," he said. Agencies can have advisory committees set up by contractors, Moulton noted, and subcommittees to advisory committees do not have the same transparency requirements as the full committees.
"The opportunity to have something closed door—it’s a tempting one," Moulton said, especially when the committee will be discussing a controversial issue.
However, convenience does not make it appropriate or legal, Moulton said.
FACA does carve out an exemption for intra-agency deliberation, said Sidney Shapiro, a FACA expert at Wake Forest Law School.
"The idea here is not to chill the kinds of conversations that staff members have among themselves," he said.
However, the fact that the white paper under consideration had been released to the public well before the meeting removes the legitimacy of this exemption, Shapiro said.
"It seems to me that they have a pretty weak case for closing the meeting when the document is already public and is the source of public discussion."
CFSA might sue the bureau to compel it to open future meetings of the Consumer Advisory Board, said Hilary Miller, who wrote the letter for CFSA.
"I have no doubt that CFSA is serious in this," she said.
However, CFSA’s spokeswoman said she hoped they would not need to litigate.
"There’s no indication right now that that’s a step that we would need to take," she said.