Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36For more information, please visit www.lenderlawwatch.com or www.enforcementwatch.com 30 31 DODD-FRANK & THE CFPB The results of the recent election have led to speculation regarding what legal changes may be in store for the consumer financial services industry and the CFPB in particular. Although President Trump and other Republicans have made statements regarding “dismantling” the Dodd-Frank Act, few concrete proposals have been put forward to date. However, one such Dodd-Frank replacement bill put forward this past summer may provide a blueprint for what we can expect. The proposed Financial CHOICE Act was sponsored by the House Financial Services Committee’s chairman, Congressman Jeb Hensarling (R-TX), who has been an outspoken critic of the CFPB. The proposed legislation seeks to restructure the CFPB and modify or repeal certain aspects of Dodd-Frank. It includes a repeal of the Volcker Rule and a roll-back of “too big to fail” requirements, the Orderly Liquidation Authority, and other Dodd-Frank reforms. The bill also would allow banking organizations to opt out of certain regulatory requirements through a “qualifying capital election.” Significantly, the bill does not provide for the elimination of the CFPB; it does, however, seek to alter its structure to a five-person bipartisan commission renamed the “Consumer Financial Opportunity Commission.” Other key legislative 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. Ultimately, we believe that the CFPB is unlikely to disappear, and declines in enforcement activity by the CFPB and other federal agencies will occur but not as drastically as some commentators may predict. Rather, we expect the career CFPB staff to continue to investigate at the same pace, but believe that it should be harder for enforcers to obtain approval to bring enforcement actions at the end of those investigations and to get approval to hold out for higher settlement dollars, particularly if the CFPB changes to a commission structure. Regulatory Reform under the Trump Administration State AG or Agency 71 DOJ/USAO 34 CFPB 50 FTC 25 HUD 22 5 - Actions by Agency 6 - Action Trends OCC 8 FDIC 3 Federal Reserve 3 US Postal Inspection 2 IRS 1 SIGTARP 1 Dept of Ed 1 FBI 1 2016 total actions by agency STATE ACTORS Although federal enforcement actions may slow down under the Trump administration, state attorneys general and regulatory agencies—who have spent the past eight years becoming increasingly familiar and adept with state and federal consumer protection laws—can be expected to pick up any slack by federal enforcers. Several state entities, including the New York Division of Financial Services and the Massachusetts Attorney General, have already indicated that they intend to maintain active pressure on financial institutions, particularly in the event of less rigorous federal regulatory and enforcement activity. The extent of this engagement by state actors remains to be seen, but we expect to see a marked increase in state-level enforcement activity in the coming years.