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Since the day it was created, Republicans have talked about dismantling or defanging the Consumer Financial Protection Bureau (CFPB). With the surprise election of Donald Trump as the next president, and continued Republican control of Congress, the GOP will certainly have that chance. It won’t be easy, however.

The brainchild of then-Harvard bankruptcy professor Elizabeth Warren, the CFPB was created in the wake of the financial meltdown caused, in part, by consumer confusion and missteps when using products like complex mortgages. Among its first tasks was creating simplified documents for home sale closings. It has also taken on a host of other controversial financial products, like payday loans and private student loans.

Consumers have generally been receptive to the agency, which celebrated its fifth anniversary this summer. At the time, it said it had helped 27 million consumers get $11.7 billion in relief from financial businesses. More than 700,000 consumers had filed a complaint with the bureau. And that was before a $185 million settlement with Wells Fargo for deceptive cross-selling.

On the other hand, Republicans in Congress have tried — via token legislative efforts destined for presidential vetoes — to kill the bureau. Sen. Ted Cruz (R-Texas) introduced the Repeal CFPB Act just last year, for example. They claim it has too much power and is hurting financial institutions with burdensome regulations.

Authors of the law that created the CFPB worked hard to design an agency that could be above the whims of party swings in Washington D.C. It is run by a single executive, instead of the typical five-member executive committee, like the Federal Trade Commission (FTC). The CFPB executive serves five-year terms that are out of synch with presidential elections, and the law stipulated that the chair could only be removed ‘for cause.’ Its funding source is not Congress, but the Federal Reserve, to prevent meddling pressure from the Capitol when Congress members might dislike individual bureau decisions.

That independence, which CFPB creator Warren has said was critical for the bureau to perform its watchdog function, has been the source of Republicans’ distaste.

“Most troubling is the fact that the CFPB is completely unaccountable to Congress and the American people,” Rep. John Ratcliffe (D-Texas) wrote in a letter explaining his sponsorship of a House version of the Repeal CFPB Act. “This unique setup makes the CFPB the least accountable regulatory agency in the federal government; a situation that invites regulatory excess and abuse.”

That setup was clearly designed to prevent a future Republican administration from killing the bureau; it will be tested now. On the campaign trail, Trump said he would work to repeal the Dodd-Frank law — the omnibus financial reform legislation that included the creation of the CFPB. His specific views on dismantling the CFPB are unknown, but he’s made little secret about his distaste for Warren, its creator.

The CFPB did not respond to a request for comment to its press office.

Could the CFPB Be Eliminated? 

Ed Mierzwinski, consumer program director of advocacy organization PIRG, says the CFPB’s structure makes it even harder to dismantle than Obamacare. So a complete elimination is quite unlikely.

“Changing the CFPB’s policy-based statute, unlike Obamacare … is subject to a 60-vote filibuster in the Senate. That’s the main hurdle,” he said.

But there will be plenty of ways to chip away at the bureau’s power via legislative maneuvering. That effort has long been under way.

“We expect [Republicans] to try and bypass that rule by attaching riders to either full appropriations bills next year or continuing resolutions,” he said. “In fact, riders to eliminate independent funding, convert it to a commission, delay the payday and arbitration rules, and more, have been attached to the House and Senate appropriations bills for years, but stripped in negotiations with the White House.”

The CFPB is right in the middle of enacting a new set of payday lending rules, and rules extending credit card like protections to newly popular prepaid debit cards. The fate of these rule-making processes is uncertain.

The biggest uncertainty, however, is the future of director Richard Cordray. Currently serving a term set to expire in 2018, a surprise federal court decision in October sets the stage for his early removal.

While considering the appeal of a penalty issued to a mortgage seller for alleged kickbacks, a federal appeals court in Washington D.C. found that the CFPB’s “removable only for cause” structure for the bureau’s director was unconstitutional. The court’s ruling means that, for now, the CFPB director serves at the will of the president, and can be removed for any reason.

It’s been expected that the CFPB will appeal that ruling, but the timing of such an appeal is now urgent.

“If the … decision stands, of course, on January 21 Trump could remove Cordray,” Mierzwinski said. “Most think it will be appealed before then and many think it will be reversed.”

Or, it could be the source of a bargaining chip between parties. The appeals court panel suggested that a commission structure would pass the Constitutional check.

A Commission on the Horizon?

CFPB critics say they favor a commission structure because it would add a layer of checks and balances to the bureau’s actions. Several bills, including the Financial Product Safety Commission Act of 2015, have been introduced by Republicans to change the structure of the agency.

“We just believe it creates an environment for more sensible rule-making from collaboration, much like among this committee, from different minds,” Wally Murray, chairman of the Nevada Credit Union League, said during a Senate Banking Committee hearing on the CFPB last year. “When you have one person in charge of the entire bureau, who sets that agenda? One person essentially. We just feel like it’s a more common sense approach to coming out with common sense regulation.”

The structure would also bring the CFPB in line with other federal agencies, like the FTC and the Federal Communications Commission (FCC).

And that’s the problem, CFPB supporters argue. Sure, a set of regulators already had authority over banks during the run-up to the housing bubble collapse. They weren’t nimble enough to stop bad practices before the damages was done.

“Part of the reason the agency has succeeded is the current single-director structure makes it easier for Congress to hold someone accountable for the agency’s core mission — concentrating the mind in a way that does not occur with multi-person boards,” Warren wrote in an op-ed defending the bureau. “The single-director structure also allows the agency to be more nimble in responding to new and emerging threats to consumers, to move faster and more definitively. And the structure permits the head of the agency to stay focused on protecting consumers, rather than burning time managing partisan sniping and bickering among the political appointees on a commission.”

Rep. Maxine Waters (D-Calif.) has been more blunt in her assessment of the proposed commission structure.

“Why are bankers, other lenders and their political allies so enamored of commissions? Because they often succumb to partisan gridlock and are only rarely able to summon the will to stand up to corporate power,” she said earlier this year. “The Securities and Exchange Commission, for example, has yet to do much of anything about the built-in corruption of the credit rating agencies, eight years after the rating agencies played such a conspicuous role in causing the financial crisis.”

Waters also pointed out the other regulators, such as the Office of the Comptroller of the Currency, have single-director structures.

“What’s so different about the CFPB? It’s the first and only financial oversight agency with a mandate to put fairness, transparency and the safety of consumers and borrowers ahead of the power and profits of banks and financial companies,” she said. “The lawmakers attacking the legitimacy of its governing structure have made it abundantly clear that what they really object to is the idea of a regulatory body successfully wielding its power on behalf of consumers and the public interest.”

That power is sure to be tested now.

Image: andykatz

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