Major Changes Coming For The CFPB, But Its Power Is Intact For Now

Since President Donald Trump signed his presidential memorandum and executive order titled “Reducing Regulation and Controlling Regulatory Costs,” which requires all regulatory agencies to essentially eliminate two regulations for every new one implemented – and further that all new regulations must muster approval from the Director of the Office of Management and Budget prior to implementation – there has been fierce debate as to whether the order applies to independent agencies such as the Consumer Financial Protection Bureau (CFPB).

Well, on Monday, that question was cleared up when Dominic Mancini, acting administrator of the Office of Information and Regulatory Affairs (OIRA), issued a memorandum giving interim guidance on how to go about implementing Trump’s executive order, which basically states that the CFPB and other independent agencies are not required to submit regulatory actions to the OIRA for review.

“Nevertheless, we encourage independent regulatory agencies to identify existing regulations that, if repealed or revised, would achieve cost savings that would fully offset the costs of new significant regulatory actions,” Mancini writes in the memorandum.

Other independent agencies that don’t need to submit regulations for review, under the order, include the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and the National Credit Union Administration.

It would seem, from this development, that the CFPB can move forward with finalizing its TILA-RESPA Integrated Disclosures rule and can also implement its final mortgage servicing rule later this year.

Aside from this, serious questions remain regarding the CFPB’s future under the new administration in the White House: A proposal currently before the Senate seeks to change the agency’s current leadership structure from that of a single director to a five-member board of directors.

The Republican-backed bill, titled The Consumer Financial Protection Board Act of 2017, introduced by Sens. Deb Fischer, R-Neb.; Ron Johnson, R-Wis.; and John Barrasso, R-Wyo. – and now also co-sponsored by Sen. Jeff Flake, R-Ariz. – would not only change the bureau’s leadership structure to a five-member committee, but also require one of those five members to be appointed chairman of the board by the president.

In addition, the bill requires that no more than three members of the board be from one political party. It also requires that the board members serve on staggered terms, with three of the five initial members serving 30-month terms and the other two (and subsequent) members serving five-year terms.

Importantly, the bill allows the president to fire any of the board members “at will,” which is a major difference compared with the bureau’s current structure, which allows the president to remove the director only “for cause.”

The bill is currently before the Senate Committee on Banking, Housing and Urban Affairs.

In addition to the Consumer Financial Protection Board Act of 2017, the administration has directed the director of the Treasury, via executive order, to analyze and report on how best to modify (or possibly even repeal) the Dodd-Frank Act, which gave rise to the CFPB. To replace the Dodd-Frank Act, Republicans are backing a bill that provides an alternative structure – The Financial CHOICE Act, introduced in 2016 by Rep. Jeb Hensarling, R-Texas. Like the Consumer Financial Protection Board Act of 2017, this proposal also calls for replacing the CFPB’s current single director with a five-member commission.

In a related development, President Trump is reportedly considering former Rep. Randy Neugebauer, R-Texas, as a possible replacement for Richard Cordray, the CFPB’s current director.

Meanwhile, all eyes are on the CFPB’s legal battle over the constitutionality of its leadership structure in the U.S. Court of Appeals for the District of Columbia. In October, the D.C. Circuit ruled that the bureau’s single-leadership structure was unconstitutional.

In that decision, the court also vacated a $103 million increase to a $6 million fine levied against PHH Corp. by Director Cordray.

In response, the bureau has petitioned for an “en banc” review of the court’s decision; however, any ruling in that appeal could end up becoming basically moot, should the bureau’s leadership structure be changed via federal legislation.


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