The House Financial Services Committee on Thursday passed the Financial CHOICE Act, a sweeping piece of GOP-backed legislation that would, if approved, gut major portions of the Dodd-Frank Act and significantly limit the power of the Consumer Financial Protection Bureau (CFPB).
As was expected, the measure passed in a party-line vote, 34 to 26.
In the latest version of the bill, dubbed by some “Financial CHOICE Act 2.0,” the CFPB would become the Consumer Law Enforcement Agency (CLEA), an executive agency with a sole director removable at will. The deputy director would also be appointed and removed by the president.
As such, the measure would essentially resolve the issue of the constitutionality of the CFPB’s leadership structure that is called into question in the ongoing landmark federal court case between PHH Mortgage and the CFPB.
In addition, the CHOICE Act, if approved, would make it so that Congress determines the agency’s budget, whereas, currently, the CFPB sees guaranteed funding from the Federal Reserve.
The bill is expected to pass in the House but faces an upward climb in the Senate, where the GOP would need a minimum of 60 votes – including support from several Democrats – in order for it to pass.
Democrats have so far been universally opposed to the bill, saying it undoes too much of President Barack Obama’s landmark banking law and even going so far as to dub its campaign against the measure “The Wrong CHOICE Act.”
In testimony she gave before the House Financial Services Committee on Tuesday, Congresswoman Maxine Waters (D-Calif.), a ranking member of the committee, called the CHOICE Act “one of the worst bills I’ve seen in my time in Congress.”
“The ‘Wrong Choice Act’ is a vehicle for Donald Trump’s agenda to get rid of financial regulation and help out Wall Street,” Waters said. “Just last week, Trump’s Treasury Secretary said he welcomes the reintroduction of this bill. The bill destroys Wall Street reform, guts the [CFPB], and returns us to the financial system that allowed risky and predatory Wall Street practices and products to crash our economy. It’s an invitation for another Great Recession, or worse. For most Americans, the memory of that economic disaster is still fresh.”
The bill would repeal about 40 provisions of the Act, freeing mortgage lenders from certain requirements so long as they retain capital to cover unexpected losses.
Waters added that the bill is “dead on arrival in the Senate, and has no chance of becoming law.”
Despite the political war over of the details of the Financial CHOICE Act, leaders of the Senate panel with jurisdiction over a Dodd-Frank have reportedly agreed to work together to find areas of common agreement.
Meanwhile, the Mortgage Bankers Association (MBA) recently wrote a letter to House Financial Services Committee Chairman Jeb Hensarling, R-Texas, supporting the bill but with certain conditions.
“MBA supports many of the goals embodied in H.R. 10,” the MBA said in the letter.
However, the 11-page letter lists certain concerns the MBA has in the areas of capital requirements, commercial/multifamily real estate, and changes to the structure of the CFPB.
With regard to the restructuring of the CFPB, the MBA said while it “continues to support the assignment of several consumer financial protection laws to a single agency such as the CFPB or the new CLEA,” it “also supports refinements of the bureau’s makeup and authorities to better address consumer needs and otherwise carry out its responsibilities.”
That means changing the leadership structure of the CFPB. But the MBA is in favor of a commission structure as opposed to a single leader.
“[The] MBA is disappointed the new version of the Financial CHOICE Act retains a single director governance structure at the CLEA,” the letter states. “We believe the governance of the current CFPB would be vastly improved if Congress replaced its single director with a bipartisan five-member commission.”
The proposed changes to the CFPB’s leadership structure were part of a set of revisions to the Financial CHOICE Act completed in April. The original version replaced the single director structure with a Consumer Financial Opportunity Commission, a bipartisan independent commission serving staggered terms.