Consumer Finance Insights
November 18, 2016

Potential CFPB Reform in the Wake of the Election

The results of the recent election have led to speculation regarding what legal changes are in store for the consumer financial services industry and the CFPB in particular.  Although President-elect Trump and other Republicans have made statements regarding “dismantling” the Dodd-Frank Act, few concrete proposals have been put forward.  In anticipating the types of reform proposals that we may see in the coming months, it may be useful to revisit recent legislative proposals that have garnered widespread Republican support, but were never enacted.

One such bill, the Financial CHOICE Act, cleared the House Financial Services Committee in September.  It could provide a useful guide for future proposals from the new Congress and Administration.  The Financial CHOICE Act was co-sponsored by the Financial Services Committee’s chairman, Congressman Jeb Hensarling (R-TX).  The proposed legislation sought to restructure the CFPB and modify or repeal certain aspects of Dodd-Frank.  It included a roll-back of “too big to fail” requirements, the Orderly Liquidation Authority and other Dodd-Frank reforms.  The Act also would have allowed banking organizations to opt out of certain regulatory requirements through a “qualifying capital election.”  Significantly, the Act did not provide for the elimination of the CFPB.  It did seek to alter its structure to a five-person, bi-partisan commission renamed the “Consumer Financial Opportunity Commission.”  Other key proposals to reform the CFPB included the following:

  • Subjecting the new Commission to the Congressional appropriations process and oversight;
  • Increasing the current threshold for banks, thrifts and credit unions to be subject to the Commission’s supervisory authority from $10 billion in assets to $50 billion;
  • Creating an Office of Economic Analysis within the Commission to perform cost-benefit analyses on all of the Commission’s proposed rules and regulations;
  • Permitting individuals and institutions to seek relief from civil investigative demands in federal court;
  • Providing defendants the right to require enforcement actions to proceed in federal court;
  • Forming a mechanism for interested parties to request and receive advisory opinions; and
  • Repealing the CFPB’s authority to regulate consumer arbitration clauses and “abusive” conduct.

Although it is impossible, at this time, to anticipate the full scope of possible reforms that will be proposed or enacted, we believe that the Financial CHOICE Act may form a blueprint for future proposals.  We will post updates here as new developments materialize.

EDITOR’S NOTE:  This post was co-authored by new LLW blogger Courtney Hayden and guest author David Permut, both attorneys in Goodwin’s Financial Industry and Consumer Financial Services Litigation practices.

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