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Opinion

The Status of the CFPB in 2017 and in the Years Ahead

Thursday, March 30, 2017 - Updated: 7:13 AM
BY JEFF GITLEN | LendEDU

Several consumer-focused initiatives catapulted forward under the Obama administration have been called into question under Trump’s lead. The Consumer Financial Protection Bureau (CFPB) is one of the regulatory watchdog agencies in the line of sight of the new administration, described as a costly, unnecessary addition to the already-saturated regulatory landscape. Trump and his team feel strongly that the CFPB should be either eradicated altogether or reduced significantly in terms of its power over financial institutions, including student loan lenders, credit card companies, mortgage loan providers, and banks. Some advocates for consumer rights vehemently disagree.

In a bold move, Attorney General Matt Denn of Delaware, along with 16 other attorneys general from Democratic states filed a motion in a federal case hoping to prevent President Trump from firing the current CFPB director, Richard Cordray. The Director’s five-year term does not end until 2018, but Trump is being urged by Republican leaders to end Cordray’s oversight of the CFPB in an effort to scale back the agency’s regulatory power over the financial industry at large. Denn and others promote the independence of the CFPB, outside the far-reaching arm of the Trump administration, as a method to protect consumers from fraudulent, misleading practices of major financial institutions.

What the CFPB Does

In 2010, federal law established the Consumer Financial Protection Bureau with the explicit mission of tightening regulation on the financial industry’s major players. In the wake of the financial crisis spawned in 2008, the Obama administration and other consumer advocates felt it necessary to create a federal agency tasked with protecting individuals, but also educating them about a variety of rights they have as consumers. Through the CFPB website, consumers have access to a plethora of tools and tips geared toward helping them make sound financial decisions. The site also offers a variety of common questions and answers about various financial products, and detailed research on financial issues facing millions of consumers throughout the country. It is even possible to analyze and investigate the CFPB’s consumer complaint database.

The Consumer Financial Protection Bureau is, more importantly, allowed to enforce federal consumer financial laws focused on the following areas of concern:

  • Uncovering unfair, deceptive, or abusive practices by financial companies
  • Minimizing discrimination in consumer finance
  • Monitoring financial markets to identify new risks
  • Taking and acting on complaints submitted by consumers

According to the agency’s 2016 Fiscal Year budget documents, the CFPB drives forward its mission to protect the rights of consumers by requesting transfers from the Federal Reserve System, the nation’s banking arm. For the previous year, total transfers were capped at $631.7 million; the budget is not to exceed $646.2 million for the fiscal year 2017. The CFPB is limited to the amount of funding it can request based on restrictions laid out in the Dodd-Frank Act. Over the last five years, the CFPB has utilized its federal government funding to recoup $11.7 billion from unfair practices, nearly all of which went back into the hands of the 27 million consumers harmed by financial institution practices.

Preserving the CFPB

In his second week in office, President Trump announced a major rollback of the Dodd-Frank Act which, ultimately, has the potential to affect the oversight currently managed by the CFPB. Rumors that the firing of Director Cordray is in the works points to a clear agenda of the current administration, focused on reducing the enforcement of regulations that helps keeps consumers safe. However, the law that put the CFPB in motion states that the Director of the CFPB may only be fired for cause, meaning his position could not be threatened simply because of political party differences. Trump’s power to remove Cordray as Director may boil down to a legal issue first brought about in October of 2016.

A federal appeals court deemed the structure of the CFPB as unconstitutional, based on the for cause firing stipulation built into the law which created the agency. In the Constitution, the President has the power to fire any executive for any reason, including political differences. Should the federal appeals court ruling stand, Cordray may soon be ending his term as Director. That is unless Attorney General Denn has his way.

The motion to intervene in the firing of Cordray is a method to keep some autonomy at the Consumer Financial Protection Bureau, according to Denn and other attorneys general who filed in tandem. Without the director position filled, President Trump takes hold of the reigns of the agency – a move Denn and other consumer advocates fear would lead to millions of consumers under protected as it relates to their rights against major financial institutions. Trump’s agenda to aid big banks, lenders, financial services companies, and the like has been clear since shortly after the election, despite his calls for draining the Washington swamp. If he were to take control of the CFPB, consumers might find fewer channels to have their voices heard, and reduced oversight may lead to an increase in the fraudulent, deceptive, and abusive practices the CFPB is meant to reduce. 

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