Whither The CFPB? In Uncertain Times, Rep. Hensarling's Vision May See New Life

Given the outcome of the presidential election, the focus is now on President-Elect Trump's campaign promises to scale back the Dodd-Frank Act and pursue deregulation of financial services. As of now, little is known about specific actions the new administration will pursue after inauguration. There is, however, a template for reform, namely, the Financial Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs Act (Financial CHOICE Act), H.R. 5983, a substitute version of which was approved by the House Financial Services Committee on September 13, 2016. This bill, if enacted by Congress, would impose sweeping reform on the regulation of financial services in the United States. Of particular interest are the provisions covering retail financial services and the powerful, controversial regulator of these markets, the Consumer Financial Protection Bureau (CFPB or agency).

On June 7, 2016, House Financial Services Committee Chairman Jeb Hensarling (R-Texas) gave a speech to the Economic Club of New York announcing a Republican plan to replace the Dodd-Frank Act with new legislation: the Financial CHOICE Act. The Financial CHOICE Act, as approved by the House Financial Services Committee, represents a wide-ranging rewrite of Dodd-Frank. Provisions of the Financial CHOICE Act would effectuate reduced bank capital requirements, repeal the authority of the Financial Stability Oversight Council, impose congressional oversight over federal agency decisions, negate the Chevron1 deference doctrine in administrative law, enhance penalties for financial fraud and self-dealing in connection with securities, repeal the Volcker Rule and provide regulatory relief for community banks and credit unions. The Financial CHOICE Act, in fact, includes the text of many House bills previously introduced by Republicans intended to reform financial services regulation as it developed during the Obama administration. From a policy perspective, the question in the 115th Congress will be the extent to which the new Trump administration will back the Financial CHOICE Act or similar legislative initiatives.

The locus of consumer financial services regulatory reform is Title III of the Financial CHOICE Act, which contains extensive amendments to Dodd-Frank Act Title X, through which Congress created and empowered the CFPB.

FINANCIAL CHOICE ACT CHANGES TO THE CFPB

Title III of the Financial CHOICE Act would not abolish the CFPB, but would modify the design...