The nation's consumer protection agency, a brainchild of Sen. Elizabeth Warren (D-Mass.), could be imperiled by Donald Trump's presidency, observers are warning.
The U.S. Consumer Financial Protection Bureau (CFPB), established under the 2010 Dodd-Frank Wall Street reform law that passed after the 2007-09 financial crisis, has cracked down on predatory payday lenders; set new standards for the mortgage market; recovered and sent back billions of dollars for consumers harmed by illegal practices of credit card companies, banks, and debt collectors; and generally "worked on behalf of working families," as Warren put it in a video marking the bureau's five-year anniversary in July.
But in that same video, Warren noted, "in spite of that success, or perhaps because of it, the agency has a huge bulls-eye on its back." Banking lobbyists and their allies in Congress have been working to dismantle and weaken the CFPB since the moment it was established.
"The election spells very bad news for the CFPB," Alan Kaplinsky, head of the Consumer Financial Services Group at law firm Ballard Spahr, told the Huffington Post this week.
As Bloomberg explained on Friday, Trump
could sign legislation proposed by Republicans that would put the agency under Congress's thumb. Lawmakers could also overturn specific CFPB regulations, including one loathed by the industry that made it easier for consumers to sue their banks.
Most importantly, Republicans are poised to get the chance to replace the CFPB's aggressive leader, Democrat Richard Cordray. His term is up in 2018, but Trump may be able to replace him even sooner if a recent court ruling is upheld that gave the president more leeway to oust the agency's director. Trump would be expected to replace Cordray with someone far less interested in pursuing tough oversight.
Indeed, Scott Pearson, another partner at Ballard Spahr, "which specializes in representing financial firms and often works with clients facing CFPB scrutiny," as the Los Angeles Times reported, said of Cordray: "He's one of the biggest problems in terms of individuals in the government that have strangled industry. Trump thinks over-regulation is a big problem, so firing Cordray is something I think he'd do the first week."
But Warren and other progressive Democrats aren't about to stand by and watch the CFPB be demolished along with other key financial regulations.
"If Trump and the Republican Party try to turn loose the big banks and financial institutions so they can once again gamble with our economy and bring it all crashing down, then we will fight them every step of the way," Warren said in the speech to the AFL-CIO labor federation on Thursday.
As Americans for Financial Reform (AFR)—which advocated for the creation of the CFPB—put it this week: "In this election, supporters of both candidates were looking for more accountability for Wall Street. The country will be watching to see whether the new President and his Congressional allies make choices—about who to appoint and what policies to embrace—that can deliver that kind of change in the public interest."
AFR's statement continued:
In Congress, members of both parties have expressed outrage over the Wells Fargo scandal and the bank's massive abuse of consumer rights. If their rhetoric is not to ring hollow, the new Administration and Congressional leaders will need to reexamine a number of policies that Republicans have regularly supported in the past. They cannot, for example, credibly call for an end to financial-industry fraud and abuse, yet continue their efforts to eviscerate the Consumer Financial Protection Bureau, the new agency that in its short life has delivered more than $11 billion in relief to consumers defrauded by banks and financial companies, while beginning to bring basic standards of fair play to a marketplace long notorious for its tricks and traps. Nor can they claim to be looking out for middle-class workers, but go on trying to overturn the Department of Labor’s fiduciary rule, which will keep Wall Street from pilfering $17 billion a year from Americans' retirement savings.
Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group, agreed. "The CFPB is very popular with the public," he told the LA Times. "If Trump wants to pick that fight, I think that's a mistake for him."