Trump/GOP Readying An Attack On The CFPB

The Republicans have never liked the Dodd-Frank Act (or the Consumer Financial Protection Bureau created by that act to protect consumers from abuses by the financial sector), and now that they have a Republican in the White House they are making plans to change the Act -- making it far more bank-friendly. Trump himself said last Monday that he planned to "do a big number on Dodd-Frank".

While Trump hasn't released his plans to attack Dodd-Frank, the GOP in Congress already has a bill. Rep. Jeb Hensarling (caricatured here by DonkeyHotey) is ready to introduce the CHOICE Act -- an odious bill that would remove many of the regulations imposed on the financial sector by Dodd-Frank. It would also de-fang the CFPB, making it much harder to hold the financial industry responsible for abusing consumers.

Here is part of an excellent article by Jared Bennett for the Economic Policy Institute. The part of the article I'm reposting concerns the CFPB, and how the CHOICE Act would change it.

The Choice Act also targets the Consumer Financial Protection Bureau, which Dodd-Frank established to protect consumers from “unfair, deceptive or abusive practices” of the financial sector, according to the law.

But Hensarling believes the agency is an example of government run amok, claiming the CFPB has “infringed on the economic freedoms of consumers.”

That sentiment, along with Trump’s election win, “will result in a sea change at the CFPB,” said Alan Kaplinsky, who leads the Consumer Financial Services Group at the law firm Ballard Spahr. “There’s a lot of discontent among the companies that are regulated and supervised and who have become the target of the CFPB.”

The most likely change would replace the CFPB’s individual director, appointed by the president and confirmed by the Senate, with a five-member commission that would have three Republicans during the Trump administration. The panel would be subject to congressional oversight and appropriations. Bank executives and their allies in Congress say the agency’s current director — former Ohio Attorney General Richard Cordray, a controversial Obama appointment initially made during a congressional recess and confirmed by the Senate only 18 months later — has too much power and is unaccountable to Congress.

CFPB crackdowns on practices the agency deems “abusive” have led some Republicans to charge that the agency is straying from enforcement into advocacy. When the CFPB announced new rules regarding the payday-loan industry, which has been charged with targeting low-income individuals with high-interest loans that can trap them in long-term debt, Hensarling fired back at Cordray.

“Accountable to no one, he alone decides for all Americans whether they can take out a small-dollar loan to meet emergency needs,” Hensarling said in a press release.

The proposed changes to the CFPB, which include repealing the CFPB’s authority to ban products and services that regulators deem abusive, are aimed at reducing what some Congress members believe are controversial actions, like the payday-lending rules.

But the agency still should enforce the law under a Republican-led CFPB, Kaplinsky said. “There are plenty of clear cut violations of law that [the CFPB] can target without taking extreme positions where the industry is caught off guard and surprised,” he said.

Sens. Mike Lee, R-Utah, and Ben Sasse, R-Neb., wrote a letter to Pence this month urging the administration to fire Cordray. Neugebauer, one of the sponsors of the Choice Act, is said to be Trump’s choice to head the agency.

Proponents of reform also say a five-person commission would allow for more industry input in CFPB decision making. Changing the CFPB’s funding source from the Federal Reserve to congressional appropriations also would make the agency more accountable by placing it under the supervision of elected officials in Congress.

Or, the change could inject politics into the agency, say CFPB supporters.

“What we know about commissions is they tend to be gridlocked,” said Yana Miles, policy counsel at the Center for Responsible Lending, a nonprofit research organization that advocates for fair lending practices.

A divided commission may prevent the agency from quickly responding to abusive practices by financial institutions, critics of the proposed structure argue.

“It wasn’t that long ago that we saw the waves of predatory lending that nearly destroyed our economy,” Miles said. The CFPB “is the one thing out there standing between consumers and the wild wild west of the days leading up to the crisis.”

CFPB critics, nevertheless, have the courts on their side, so far. A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit ruledlast year that the agency’s single-director structure is unconstitutional. The CFPB has asked the full D.C. Circuit to rehear the case.

Supporters say the CFPB is accountable to consumers, as illustrated by a record of punishing banks’ wrongdoing. Since opening its doors in 2010, CFPB actions have resulted in more than $11 billion in compensation or debt reduction to consumers. Among its major cases:

• One of its most high-profile decisions came last year, when the CFPB finedWells Fargo $100 million for opening accounts without customers’ consent, with another $35 million going to the Office of the Comptroller of the Currency and $50 million to the City and County of Los Angeles.
• The CFPB brought complaints in 2014 against Corinthian Colleges, a for-profit college accused of overselling the employability of its graduates, and ITT Educational Services, a for-profit institution accused of predatory student lending.
• On Jan. 18, the CFPB announced a lawsuit against Navient Corp., the nation’s largest student-loan servicer, for “systematically and illegally failing borrowers at every stage of repayment.”

The CFPB relied partly on its mandate to prevent abusive practices to pursue the Wells Fargo case, Miles said. Under changes in the Choice Act, “a Wells Fargo situation could pop up again and it would either not be addressed or would take a much longer time to get to it,” Miles said.

Changing the CFPB may not be so easy, despite Republicans’ control of Congress and a new White House occupant they see as an ally. Sen. Warren, who spearheaded the creation of the agency, warnedHensarling and his colleagues about the CFPB’s importance during a November conference of the Wall Street Journal’s CEO council, a group of influential business leaders.

“The Consumer Financial Protection Bureau is doing the people’s business. And it has its own fan club out there: It’s got the people it’s working for,” Warren said. “You try to take the legs out from underneath the Consumer Financial Protection Bureau — I think that’s not only a problem for Donald Trump and for the Republicans. I think this is something that the American people will say ‘enough.’”

Indeed, 56 percent of Trump voters want the CFPB either left alone (41 percent) or expanded (15 percent), according to a Morning Consult pollconducted in December. Likewise, 71 percent of Republican and Democratic voters said they supported the CFPB, according to a 2016 poll by Lake Research Partners.