by Bryan Dornan
As he was campaigning for the presidency, President-Elect Donald Trump made clear he does not think highly of the 2010 Dodd Frank law. This has made many people wonder what is going to happen to the Consumer Financial Protection Bureau or CFPB.
Now that Trump has been elected and his financial regulation team is being assembled, we can make some predictions about the CFPB in 2017:
#1 the CFPB Will See Major Changes
The CFPB has been fought aggressively by many in the financial industry as well as by many DC lawmakers. This hard line could result in Trump entirely gutting the agency and shutting it down.
However, closing the agency in its entirety would require legislation, and the Democrats in the Senate will not allow that. However, it seems likely that Republicans will skirt a Senate filibuster by taking smaller legislative actions that will whittle down the authority of the CFPB. Specifically, it is expected that the agency will have less authority to restrict banking activities.
#2 An Opponent of the CFPB Will Likely Be Treasury Secretary
Rep. Jeb Hensarling (R-TX) has been one of the fiercest critics of the CFPB, and he could be the next Treasury Secretary. He also is one of the strongest backed legislators in Congress by banks. Hensarling was second only to Paul Ryan among House members for receiving campaign contributions from banks.
Even if Hensarling is not the next Treasury secretary, he is having a strong influence. Much of the financial reform ideas coming from the Trump team are very similar to legislation that Hensarling tried to pass earlier this year.
#3 CFPB Director Could Change
The biggest change to the CFPB that is imminent in early 2017 is going to be Director Richard Cordray being cashiered. Cordray has been a very controversial figure at the CFPB; President Obama installed the AG from Ohio during a recess appointment more than four years ago. That move angered some in Congress, and many in that body would not hear any testimony from Cordray until he was properly vetted and approved by the Senate. He finally was confirmed by the Senate in 2013, but there is plenty of bad blood there.
Another problem with the director of the CFPB is that he cannot be easily removed by the president. He cannot be dismissed at will, but only for cause. So, this protects the Director from pressures that regulated parties could try to put on other branches of the government.
It is thought that Trump would prefer to name a new interim director, as allies on the Hill try to pass new legislation that will restructure how the CFPB is designed. One idea is to have a multi-member commission in charge of the CFPB.
#4 More Changes on the Way
Many lawmakers that have the backing of the banking industry have been trying to gut the CFPB for years by getting the bureau to delay its enforcement actions. Or, they tried to get it to redo research on payday lending and on forced arbitration rules. The Hill has reported that the Credit Union National Assn. has written to Cordray and asked him to delay all pending CFPB rules. Also, Trump has promised to put in a moratorium on any new rulemaking when he assumes office in January 2017. Does this mean we could see expanded guidelines on “bad credit home loan” products in 2018?
Other Possible Changes
Some Democrats on the Senate Banking Committee stated that they are willing to work with Trump to some degree on the Dodd Frank law, but that there is only so much they are willing to do with the CFPB. Ohio Senator Sherrod Brown has stated that he would consider working on cutting regulations for community banks, but if the changes come from gutting the CFPB, he will not be nearly as supportive.
There also are rumors that one of the potential changes in other areas of the CFPB could be rules in mortgage reporting, underwriting, and various aspects pertaining to credit unions. Some in Congress argue that the CFPB is preventing some credit unions from lending as freely as they would prefer.
Something to Ponder
Many in the financial and banking sectors strongly argue that while the CFPB has a noble goal of protecting consumers, the Obama administration went overboard in 2009 and 2010 in its efforts to regulate financial markets with the CFPB. Even though Trump is not even the president yet, just the talk of deregulating the financial sector and gutting the CFPB has led to a major stock rally.
It is hoped that if the CFPB is reined in to a considerable degree in the next year, that this will lead to a continued stock rally and generally stronger economic growth and activity across all sectors of the US economy.