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Future of CFPB Uncertain under Trump Administration

ABSTRACT: The results of the November 8, 2016 election have unmistakably cast doubt on the future of the CFPB, particularly as it exists today. With Donald Trump as President-elect, along with a Republican-held House and Senate, it is likely that some of the preceding years' regulations and consumer protections will be undone.

Beginning early on in the 2016 campaign season, President-elect Trump has expressed his contempt for modern banking regulations. In a May 2016 interview with Reuters, Trump stated that “Dodd-Frank has made it impossible for bankers to function.”  He further reasoned that the legislation, which led to the creation of the Consumer Financial Protection Bureau (the “CFPB”), stunts lending and job creation and “has to stop.”  When asked for more detail regarding any changes he wished to make, at that time, Trump indicated it would “be close to dismantling of Dodd-Frank” altogether.

Since the election, Trump has not wavered on this position, as expressed on his “transition” website: 

“Following the financial crisis, Congress enacted the Dodd-Frank Act, a sprawling and complex piece of legislation that has unleashed hundreds of new rules and several new bureaucratic agencies.  The proponents of Dodd-Frank promised that it would lift our economy. Yet now, six years later, the American people remain stuck in the slowest, weakest, most tepid recovery since the Great Depression. [ . . .] The Financial Services Policy Implementation Team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation.” 

Trump’s statements, along with the recent D.C. Circuit holding, suggest that the future of the CFPB is on the line.  Because the U.S. District Court of Appeals for the D.C. Circuit held in PHH Corp. v. Cons. Fin. Protection Bureau that the CFPB Director may now be terminated at-will by the President, Trump’s election certainly has the potential to impact Director Cordray’s position in the Bureau.

In addition to these factors, Congressional Republicans have already stated their intention to overhaul Dodd-Frank and to change the structure of the CFPB.  In June of 2016, Jeb Hensarling, the Republican chairman of the House Financial Services Committee, introduced the Financial Choice Act.  The bill was approved by a House Committee in September of 2016.  The Financial Choice Act would, among other things, replace the CFPB director with a bipartisan committee named “Consumer Financial Opportunity Commission.” 

While the Financial Choice Act was denounced by Democrats and is not expected to pass in 2016, the Republican Party’s sweeping victory on election night, taken with the clear and unequivocal statements of Trump concerning Dodd-Frank and the CFPB, bode well for the future of this proposed legislation.

Amidst numerous other policy changes the future administration will endeavor to put into effect, only time will tell how extensive any changes to Dodd-Frank will be, and how much of a priority financial services reform will be in 2017.  Servicers are cautioned to remain compliant with current regulations and to seek the advice of counsel and compliance professionals concerning any changes that may occur in the coming months.