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CFPB faces budget cuts in face of looming fiscal cliff

The Consumer Financial Protection Bureau, Consumer Product Safety Commission and Federal Trade Commission could see a $69 million budget reduction as a result of automatic spending cuts that could be triggered by the fiscal cliff.

If President Obama and Congress cannot come to an agreement regarding the looming fiscal cliff, $109 billion in federal budget cuts will take effect Jan. 2, part of a process known as sequestration, according to the Lake Wylie Pilot.

Critics of the plan maintain that there is too much regulatory overlap between the various agencies.

“I would shut them down,” Mark Calabria, director of financial regulation studies at the Cato Institute, said, the Lake Wylie Pilot reports. “I just don’t think these agencies are very effective. Certainly we had all these consumer protection laws on the books, and that didn’t stop the financial crisis from happening.”

Consumer advocates have warned against sequestration, saying that the process would further weaken the federal watchdog groups, leaving American consumers more vulnerable to unsafe products and abusive business practices.

The FTC, which is responsible for enforcing consumer protection and antitrust laws, would face $26 million in annual budget cuts if sequestration occurs.

Susan Grant, the director of consumer protection at the Consumer Federation of America, said that the agency’s budget is already lean.

“[If sequestration occurs], it will take longer to investigate and prosecute cases,” Grant said, according to the Lake Wylie Pilot. “It will hamper the FTC’s ability to keep up with the businesses that they’re supposed to be making sure are playing by the rules.”

Grant said that American consumers expect federal agencies to protect them from unfair practices in the marketplace.

“It’s just an example of why across-the-board cuts like this are a blunt instrument that really doesn’t serve the public well,” Grant said, the Lake Wylie Pilot reports.

The budget of the CPSC, which is responsible for protecting the American public from death or injury resulting from the use of unsuitable consumer products, including toys and household cleaners, would lose approximately $9 million to sequestration.

The CFPB, which oversees credit reporting, mortgages, debt collection and other consumer services, would lose approximately $34 million to sequestration.

“Agencies have learned to deal with flat budgets, but most have already been cut to the bone,” Ed Mierzwinski, the director of the consumer program at U.S. PIRG, a consumer advocacy group, said, according to the Lake Wylie Pilot. “Sequestration cuts on top of flat budgets is a recipe for more fraud, more dangerous products and less consumer protection.”

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