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Near term, Congress presents best hopes. Longer term, a new director will bring change By Richard Riese, principal, SMAART.COnsulting


fter a presidential campaign pr e d ic at e d on sh a k i ng up Washington, the prospects for a Consumer Financial Protection Bureau transition are comparatively modest—and bankers need to play a part in realizing what can be accomplished. The first reality: Until a new CFPB director takes office, Congress will play a more immediate role in bringing about change. Agency leadership, unless Richard Cordray were to leave, won’t change for another year and a half. With that in mind, here is what bankers may expect.

Agency leadership

Unlike Treasury, with key appointees who serve at the pleasure of the president, CFPB has one Senate-confirmed director, whose term does not expire until spring 2018. It is inevitable that President Trump will have an opportunity to appoint the second CFPB director. Once a Republican director makes it through the confirmation gauntlet, the biggest impacts should be in these areas: Rulemaking. Hav ing completed the Dodd-Frank Act mandatory rule assignments, CFPB’s agenda has been taken over by discretionary rules like arbitration, debt collection, and payday lending. Not only will there be fewer such initiatives under a Republican director, he or she also will be in a position to reconsider discretionary rules already promulgated. Enforcement. Enforcement priorities will change. First, the penchant for developing a novel application of UDAAP or fair-lending theories and applying them retroactively will diminish. A second area is the likely insistence on a greater degree of proportionality between alleged consumer harm and enforcement remedies. Far less reliance on civ il money penalties being superimposed on consumer compensatory damages and more credit given for self-identifying and self-correcting compliance programs will characterize future CFPB enforcement cases. 12


Burden reduction. During the term of the next director, the Dodd-Frank mandated, regulatory review cycle will take place. With Republican hands at the helm, this should result in more realistic adjustments than would be expected under a Democratic regime.

Legislative activity

The next Congress likely will be engaged along three lines of activ ity regarding CFPB transition: amending agency structure, fine-tuning agency statutory authority, and conducting oversight. S t ru c t u r a l c h a n g e . No doubt , t he Republican majority in both houses will continue efforts to change the regulatory structure of CFPB and alter its budgetary appropriation status. Whether or not the prospect of a Republican bureau director changes the Democrats’ opposition to a commission-type organizational structure is unknown. If the commission proposal is pursued separately from the appropriation issue, it could have a greater likelihood of success. On the other hand, Republicans may be less enthusiastic about creating a commission on the eve of their opportunity to appoint the next independent CFPB director. Authority amendments. Beyond the battle over structure, legislative change also

December 2016/January 2017

should include an array of other reforms to Dodd-Frank’s Title X. These include eliminating CFPB authority to prohibit predispute arbitration agreements and refining Equal Credit Opportunity Act rule-writing provisions to remove CFPB authority to regulate commercial credit discrimination standards. Oversight. Congress is well-practiced in conducting agency oversight hearings. This will take on an even more robust posture in the next administration when the current director knows that the White House no longer has his back. However, bankers and trade associations cannot simply trust to an amorphous electoral mandate to block CFPB efforts to embed the last agenda items of the Democratic administration into the bureau’s DNA. They will need to mobilize facts and effort to turn back unwarranted rules and enforcement initiatives. Without this degree of commitment, congressional oversight will be more political theater than the exercise of real political power. In addition, bankers have a lways asserted that they are the trusted providers of financial services and products to responsible customers. They must live up to that pledge every day. Adapted from an article on CFPBprospects

December 2016 January 2017 Banking Exchange  
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