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GOP, business groups launch campaign to constrain CFPB

November 18, 2016
In the wake of Donald Trump’s presidential victory, Republican lawmakers and business groups are crafting plans to rein in the federal government’s consumer-finance watchdog.
The trade group for credit unions has demanded that the Consumer Financial Protection Bureau immediately "cease its pending rulemaking" affecting its members, seeking to give the new administration a chance to cast a more skeptical eye on the proposals than the current Democratic White House would provide. The agency has "stifled" the industry’s ability to serve its customers, Jim Nussle, head of the Credit Union National Association, said Nov. 11.
"I am encouraged that the Trump administration seems eager to combat this regulatory overreach, and I look forward to working with them in those efforts," Texas GOP Rep. John Ratcliffe said Nov. 14. Ratliffe last year sponsored legislation jointly with a fellow Texas Republican, Sen. Ted Cruz, to abolish the agency, which was created by the 2010 Dodd-Frank Act and championed by Massachusetts Democratic Sen. Elizabeth Warren. 
President-elect Trump hasn’t said specifically what he would do with the CFPB, but his transition team has issued a statement saying it plans to "dismantle" Dodd-Frank. And the agency—tasked with ramping up federal oversight of lightly regulated corners of finance, such as debt collection and small-dollar-high-interest payday loans—has long been a main target of Dodd-Frank critics, who say it epitomizes regulatory overreach stifling growth.
President Barack Obama has been able to shield the agency from such attacks with his veto threats. But soon that protection will disappear, throwing the young agency’s future into disarray. 
Meantime, consumer advocates led by Warren have launched their counterattack.
"It’s only been a few days since the election and Wall Street banks and their Republican friends in Congress are already licking their chops at a chance to undercut the independence of the Consumer Financial Protection Bureau," Warren wrote in a Facebook post Nov. 13.
"We have gone from DEFCON Two to DEFCON One," said Ed Mierzwinski, consumer program director at the Federation of State Public Interest Groups, comparing the situation to the most severe military emergency status. "This is a battle." The consumer advocacy group plans to hire more staff and schedule frequent visits to Republican-controlled states to urge community groups and journalists to help protect the CFPB.
The rapidly escalating battle over the future of the agency is part of a broader post-election war over financial regulation, and federal regulation in general. Democrats have been urging agencies to accelerate rulemaking before the ideological direction of leadership changes, while Republicans have demanded a freeze until Trump and his appointees can take over. 
House Republicans said Nov. 15 that they were sending a letter to every government agency asking them to halt all rulemaking until the Trump administration takes office. Jeb Hensarling, chairman of the House Financial Services Committee, asked Mary Jo White, the departing chairman of the Securities and Exchange Commission, to avoid completing any further rules during the remainder of her term.
One short-term constraint facing CFPB critics is that the agency, when created, was given a high level of independence, and it could take time to scale back those powers. It is ruled by a single director, Richard Cordray, rather than by a bipartisan multi-member commission, like the SEC. Congress doesn’t have authority over the CFPB budget, so lawmakers can’t threaten to withhold funds, the way they often do to prevent other regulators from enacting certain rules.
Industry experts say it could be a year or so until a significant structural change could be made to the CFPB. That is in part due to a pending court case in which a panel of federal judges in October ruled the bureau’s single-director unconstitutional and ordered a new structure giving the president the power to dismiss the director at will. Corday’s term runs until 2018. Under current law, Trump couldn’t force him out without cause.
The CFPB is likely this month to ask for an en banc review of the decision by the entire appeals court in Washington. The current structure remains in place while the appeal is being considered — a process that could take a year. 
Since the elections, Cordray has instructed the bureau’s staff to continue moving ahead with rulemaking at its current rapid pace, according to people familiar with the situation. 
That means the CFPB will try to complete its major pending rules, particularly a controversial one proposed in April that would make it harder for banks to force consumers into mandatory arbitration in disputes, opening the door for more class-action lawsuits. Some analysts think the CFPB may aim to finalize the rule before Trump takes office on Jan. 20.
If the CFPB issues a final version of a rule after Trump takes office, his Office of Management and Budget could reject it before the regulation takes effect. Congress also could try to vote on measures blocking the rules, on the expectation that Trump — unlike Obama — wouldn’t veto them.
Beyond rulemaking, the CFPB also has rankled industry with its expansive enforcement strategy. "We believe that, in the meantime, the CFPB will continue to be aggressive and continue to bring enforcement actions," said Kathleen Ryan, a lawyer at BuckleySandler LLP and a former rulemaking official at the CFPB.