This week marked a 1-2 punch against the much maligned Consumer Protection Finance Bureau (CFPB) as not only was the overzealous government agency’s existence argued against in front of the 11-member court of appeals, but President Trump’s presented budget literally guts funding for the agency under the Republican president.
First – the court case:
Theodore Olson, an attorney for financial services company PHH Corp., the plaintiff in the case, sued the CFPB in 2014. He argued Wednesday before six Democratic-appointed judges and five Republican-appointed judges that such a structure gives the CFPB director more power than was intended by framers of the Constitution.
“You have a concentration of power,” Olsen told the judges. In creating the CFPB, he noted, “Congress itself understood and recognized that it was going further than it ever did before in limiting the President’s power.” A single director who cannot be dismissed without cause, and with a term that potentially outstrips that of the president, limits the chief executive’s authority, he maintained.
and..
he court also could decide against the one-person directorship structure. That would allow the president to appoint a several-member board, like with the Federal Trade Commission and the Securities and Exchange Commission.
Observers say a definitive decision may not be handed down for more than a year. By then, Cordray will be finishing his five-year term, anyway, and President Trump could appoint a new director.
A governing board would be fine with many in the financial services industry.
“We believe such a structure would allow for a diversity of views and expertise, as well as providing continuity through different administrations, rather than having a regulation yo-yo each time the director changed,” said Joe Gormley, assistant vice president and regulatory counsel for the Independent Community Bankers of America (ICBA), based in Washington, D.C.
And the coup de grâce, the Trump budget proposal:
Currently, the CFPB gets its funding from the Federal Reserve, but Trump’s budget would shift the CFPB’s appropriations process to Congress, a move that other Republicans have long pushed for.
In fact, recently Rep. Andy Barr, R-Ky., reintroduced the Taking Account of Bureaucrats’ Spending Act that would make the budget of the CFPB subject to congressional appropriations.
But Trump’s budget goes beyond that, calling for the reduction of the CFPB’s mandatory funding in 2018 and then reducing the CFPB’s budget to almost nothing in subsequent years.
The proposal regarding the CFPB is on page 158 of the 159-page budget, under the heading: “Restructure the Consumer Financial Protection Bureau.”
The proposal would cut the CFPB’s budget by $145 million in 2018, with the cuts increasing to more than $700 million by 2021.
and…
Here’s how the Trump budget proposal justifies the cuts to the CFPB’s budget:
“Restructuring the CFPB to refocus its efforts on enforcing enacted consumer protection laws is a necessary first step to scale back harmful regulatory impositions and prevent future regulatory hurdles that stunt economic growth and ultimately hurt the consumers that CFPB was originally created to protect. Furthermore, subjecting the reformed Agency to the appropriations process would provide the oversight necessary to impose financial discipline and prevent future overreach of the Agency into consumer advocacy and activism.”
As one might expect, Democrats greeted Trump’s CFPB proposal with a cold reception.
A bad week for the CFPB, but a glimmer of hope to community lenders who have been finding themselves regulated out of business, as well as the consumers they serve.