Solveig Singleton and Jerome Famularo
The draft of the CFPB Reform Act of 2026 includes provisions that clarify the Consumer Financial Protection Bureau’s duty to perform a cost-benefit analysis (CBA) of proposed rules. Addressing the bureau’s carelessness in conducting CBAs should improve the quality and stability of its rules, so this change is overdue.
The improvements will be greatest if the bureau does not enact rules that fail a CBA. However, subsections 103 (5)(A) (viii) and (ix) require the bureau to publish the justification for a rule enacted even when a CBA shows that another rule would be better or the rule’s costs exceed its benefits. This implies that the bureau may enact rules that fail a CBA, reducing the effectiveness of the reforms.
Legislators might address this by calling for Congress to vote up or down on proposed rules that fail the CBA. OMB should then review or conduct the CBAs so that the bureau cannot skew analyses to avoid the need for a vote. Alternatively, Congress could be required to vote up or down on all major proposed rules, as set out in the REINS Act.
The Bar to Regulation When Costs Exceed Benefits Should Be High
What should happen when a proposal the bureau favors does not pass CBA?
Making the bureau conduct careful CBAs should raise the quality of regulation, even if the bureau enacts some rules that fail CBA. The process will lead the bureau to confront uncomfortable facts and thorny issues, provide the public, courts, and Congress with information to consider in reviews, and prevent the bureau from enacting rules in haste. And simply barring the bureau from enacting rules that fail CBA would give the bureau incentives to skew its analyses, so its proposals always pass CBA.
Given historical context, however, lawmakers should ultimately make the bureau (or all agencies) clear a high bar to enact rules that fail CBA. First, the bureau has pursued harmful policies and should not get the benefit of the doubt. Second, regulation across every sector of the US economy is hampering growth, and we should greet new rules with skepticism. Third, rules that are justifiable even if they do not pass CBA involve tradeoffs best made by legislators guided by OMB (as discussed below).
Lawmakers could raise the bar by requiring Congress to vote on proposed rules that fail CBA before they become law. Alternatively, lawmakers could require Congress to vote up or down on every major rule.
When Rules Are Hard to Assess Using CBA, Legislators Should Make the Call
Some rules may be justified without CBA.
First, fundamental rules such as laws against fraud are essential to markets, defining contract and property rights. Recognizing this, we do not subject these rules to CBA. These rules evolved generations ago, leaving the bureau with little work to do outside of enforcement. If the bureau is tinkering around the edges of these rules, its proposals should pass CBA: for example, the bureau should bear in mind that the optimal amount of fraud is not zero, because the cost of enforcement to reduce it to zero would be immense.
Second, the benefits of policies that reflect values such as privacy or transparency are hard to quantify, making CBA assessments difficult. Examples include disclosure or privacy laws. The values involved are rarely well-defined and may conflict, meaning that choosing a rule entails tradeoffs—privacy versus the free flow of information, for example. Legislators, not unelected officials, should make these tradeoffs. The bureau’s minor adjustments to value-laden rules should pass CBA.
Third, a rule might be justifiable even when it does not pass CBA because its costs or benefits cannot be calculated with reasonable certainty. For instance, estimates of the probability that a cost will be incurred might vary widely.
Ordinarily, the bureau could assess a rule that prevented a low-probability but catastrophic harm using CBA. For example, suppose a regulation costs $500 million annually but is expected to reduce the annual probability of a $100 billion systemic loss from 1.0% to 0.4%. The expected annual benefit is:
(1.0% − 0.4%) × $100 billion = $600 million
The regulation would pass CBA even though the most likely outcome in any given year is that the regulation costs $500 million and prevents nothing. The benefit is reducing expected loss.
But, as noted above, probability estimates can vary widely. The bureau might have credible evidence that something could cause harm, but nobody can defensibly say whether the probability is 0.1 percent, 1 percent, or 10 percent.
In other cases, the magnitude of a regulation’s costs and benefits is uncertain. Section 103 of the draft CFPB Reform Act includes an important and helpful provision requiring the bureau to estimate probability distributions for relevant outcomes. Rather than relying on a single estimate of a regulation’s costs or benefits, the bureau should consider the range of possible outcomes and the likelihood of each. A regulation might, for example, have a small probability of producing very large benefits but a much greater probability of producing only modest benefits.
When a rule’s effects are very uncertain, the question of whether it should be enacted will again involve tradeoffs and value judgments. A CBA would be a sensible starting point. But Congress (responsive to voters) should also be involved, with the advice of OMB.
Policymakers Should Limit the CFPB’s Incentives to Skew Its CBAs
Ideally, the bureau should not enact a proposal if CBA reveals a better alternative or if the costs of a rule exceed its benefits. But a law requiring Congress to vote on proposals that fail CBA would give the bureau incentives to skew its analyses to evade the limit. OMB or another independent outside agency should be tasked with reviewing the bureau’s CBAs.
Alternatively, all CBAs for the bureau and/or other agencies could be conducted by OMB or another independent authority. Yet another approach would be to require Congress to vote up or down on all regulations, as proposed by the REINS Act.
Conclusion
Reforms that require the bureau to carefully assess the costs and benefits of proposed rules are good policy. Ultimately, though, the bureau should be discouraged from enacting rules that fail CBA by requiring Congress to vote up or down on these rules.