U.S. consumer financial
agency could be defanged under Trump
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[November 11, 2016]
By Lisa Lambert
WASHINGTON
(Reuters) - The U.S. Consumer Financial Protection Bureau, already in
legal limbo after an October court decision, could find its powers
scaled back by President-elect Donald Trump and a Republican-led
Congress, according to members of both political parties, lobbyists and
lawyers.
That may mean the end of many of the agency's rule-making actions that
have enraged critics, including a proposal to stop companies from
blocking customers from class action lawsuits and another one to limit
payday lending.
Creation of the CFPB was authorized in the 2010 Dodd-Frank Wall Street
reform law enacted in the aftermath of the 2007-09 financial crisis. The
agency began operations in 2011.
An agency to protect consumers' finances was the idea of liberal
Democratic Senator Elizabeth Warren of Massachusetts. Its creation is
considered one of Democratic President Barack Obama's top domestic
policy achievements.
A Trump administration is expected to be hostile to the agency as it is
currently formulated.
"The election spells very bad news for the CFPB," said Alan Kaplinsky,
head of the Consumer Financial Services Group at law firm Ballard Spahr.
![](http://archives.lincolndailynews.com/2016/Nov/11/images/ads/current/american_legion_sda_2014.png)
Many Republicans opposed the agency's creation. They now say they
dislike its structure and believe it oversteps its authority in
enforcement.
"It's a very fragile thing. It was birthed in controversy and is under
constant attack," said consumer attorney Deepak Gupta, who worked at the
CFPB in its early days. "It may not survive the way we know it through
this administration."
A single director leads both rule-making and enforcement, and can be
dismissed only for cause. Furthermore, the agency is funded by the U.S.
Federal Reserve system, which means it is not dependent on the typical
congressional appropriations process.
The Republican-led House of Representatives Financial Services Committee
in September passed legislation without any Democratic votes that would
change the name and structure of the agency and would create a
five-member commission to govern it.
Republicans also have pushed for the agency to receive funds from
Congress to make it accountable to elected leaders.
Both of those proposals would greatly weaken the power of Richard
Cordray, the agency's original and current director.
Obama has blocked these Republican efforts with veto threats.
Trump, though he has not directly addressed the CFPB, has said he wants
to roll back parts of Dodd-Frank. Trump could, if he wanted to, fire
Cordray on the first day of his presidency, especially following an
October ruling by a three-judge federal appeals court panel that found
the agency's structure unconstitutional and that the president should be
able to dismiss the director at will.
That ruling was put on hold while the CFPB decides whether to petition
the entire U.S. Court of Appeals for the District of Columbia Circuit
for a review or appeal the ruling to the U.S. Supreme Court. The agency
has until Nov. 25 to decide. Trump's administration could withdraw any
appeal, letting the decision stand.
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![](../images/111116pics/busine37.jpg)
Consumer Financial Protection Bureau (CFPB) Director Richard Cordray
answers questions at the Reuters Washington Summit in Washington,
DC, U.S. October 23, 2013. REUTERS/Jonathan Ernst/File Photo
![](../images/ads/current/demay_inv-lda081412.png)
Cordray, appointed in 2013, is halfway through his five-year term.
Few in the banking industry think the entire agency will be eliminated.
Democrats who support the agency will have a large presence in the
Senate. Warren, who was Obama's first choice to head the agency, has
promised that Democrats will fight efforts to defang it.
Even some bankers want to see it stay. Richard Hunt, president of the
Consumer Bankers Association, said his group would fight to maintain the
CFPB in some form because it consolidates consumer banking rules under
one regulator.
A DIFFERENT DIRECTOR
Trump takes office on Jan. 20. Cordray could be replaced early in 2017,
said Mark Calabria, an economist at the libertarian Cato Institute think
tank. Trump's transition team is already looking into Cordray
replacements, he said.
The law allows for the president to terminate a director over
inefficiency, malfeasance or neglect of duty, which leaves room for
Trump to find cause regardless of what the appeals court decides,
Calabria added.
Cordray has set precedent with enforcement cases that Calabria and other
critics have called backdoor rule-making.
"Cordray has left the CFPB vulnerable to what his successor may want
done because he didn't hardwire rule-making," Calabria said.
If Cordray quits or is removed, statute calls for his deputy to step
into the job temporarily. Acting Deputy Director David Silberman, also a
strong consumer advocate, would likely continue to carry out the current
agenda, said Quyen Truong, a partner at Washington law firm Stroock &
Stroock & Lavan. Truong was the assistant director and deputy general
counsel for the CFPB until earlier this year.
![](http://archives.lincolndailynews.com/2016/Nov/11/images/ads/current/aaa_lda_FFARM_2016.png)
The CFPB did not respond to requests for comment on Cordray's possible
departure or the fate of current rule-making actions.
(Additional reporting by Emily Stephenson; Editing by Linda Stern and
Will Dunham)
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