The Treasury Department is expected to release a report as early as today that would lay out the Trump administration’s position on restructuring the financial services regulatory regime put in place by the Obama administration.
In many respects, the report is expected to be somewhat less radical than a bill passed by the House of Representatives, which would largely obliterate may of the new rules put in place in the wake of the housing bubble collapse and the ensuing financial crisis. However, one element of the federal financial services oversight regulatory structure isn’t expected to escape a major overhaul: The Consumer Financial Protection Bureau.
The CFPB was put in place as an independent watchdog agency by the Dodd-Frank Wall Street Reform and Consumer Protection Act, and unlike many such agencies, it was given teeth to go along with its bark. The agency has hit various sectors of the financial services industry -- payday lenders, mortgage banks, credit card issuers and others with enforcement actions over its brief history. In the process, it has returned tens of millions of dollars to consumers affected by unfair practices.
But the CFPB has also long been the subject of complaints from the financial services industry, which sees it’s examinations as tyrannical, and from powerful detractors in Congress, who object to its leadership and funding structures. One of the key sticking points is that this an independent entity run by a single director rather than by a bipartisan commission similar to those running the Securities and Exchange Commission and the Federal Communications Commission.
Last year, a panel of the US Circuit Court of Appeals for the District of Columbia Circuit ruled that the structure of the agency, particularly the fact that its director cannot be dismissed by the President except for cause, is unconstitutional. The full circuit court reheard the case last month, and a ruling is expected late this summer.
According to The Wall Street Journal, the Trump administration’s report is especially critical of CFPB and proposes a number of changes. Among the most significant is stripping the agency of its right to launch examinations of financial institutions.
Large banks and other financial firms have complained about the additional burden of having to respond to yet another regulatory agency in an industry that is already one of the most highly-regulated in the country. However, defenders of the CFPB would argue that its ability to demand access to the internal workings of large financial firms has helped it uncover many examples of wrongdoing that resulted in consumers who had been harmed being compensated.
The White House also proposes changing the structure of the agency, though not as dramatically as the House Republicans might prefer. The CFPB would still be overseen by a single director, but that director would be answerable to and would serve at the pleasure of, the President.
The White House could not unilaterally make these changes to the agency, as it was created by an act of Congress. But the report will serve as a clear signal to GOP members of the House and Senate as to how far the administration is willing to go in tightening the watchdog’s leash.