One reason why the Consumer Financial Protection Bureau (CFPB) has engendered such controversy is because it was set up on a false premise.

The CFPB is supposed to protect consumers from “faulty” financial products, but it ignores the fact that what might be a bad financial product for one person might actually be perfect for someone in different circumstances.

Designing rules that attempt to define what is a good financial product for everyone is a very difficult task. It is one reason why the Bureau’s rules are so long and complex, and even then they fail. A good example is the 1,700-page prepaid debit card rule, which effectively outlaws a feature that three in 10 card users say they want to keep—the ability to become “overdrawn” to make a payment at point of sale.

CFPB director Richard Cordray
CFPB director Richard Cordray IMAGE: Bloomberg News

The CFPB wants to regulate this as credit, which means that few card providers will offer the service, given the burdensome regulation involved. While a lot of card users will be happy with the change, a significant minority will not be.

This is one of several reasons why Congress should use the Congressional Review Act to disapprove the CFPB’s rule. Senate Banking Committee’s Chairman Mike Crapo (R-ID) today signed off on a discharge petition to advance a resolution to do just that to the full Senate. Sen. David Perdue (R-Ga.) is the sponsor of the resolution, which has a counterpart in the House.

As CEI and other groups argued when the resolutions were first proposed: "Thousands of consumers and dozens of Members of Congress on both sides of the political aisle have repeatedly urged the CFPB to alter course so as to not hamper underserved consumers access to important financial products and features. However, the CFPB ignored this advice and has continued its aggressive approach to overregulation and will ultimately harm the vulnerable Americans it was supposed to help."

The millions of people who use prepaid cards as an alternative to expensive and unresponsive banking deserve the widest variety of products on offer. Congress should step up and tell the CFPB that far from protecting consumers, it has damaged consumer choice with this rule.