Of all the questions looming after Election Day, for the financial services industry the biggest question of all is: What happens to the Consumer Financial Protection Bureau (CFPB)?
During the campaign, President Donald Trump touted his plans to dismantle Dodd-Frank, but never specifically addressed the CFPB. Facing a recent court decision questioning the Constitutionality of the young agency, speculation on the future of the CFPB and Director Cordray prevails.
As President Ronald Reagan said, “government programs, once launched, never disappear…..a government bureau is the nearest thing to eternal life we’ll ever see on this earth”. Unwinding a federal agency, even in its infancy, is easier said than done. Even more interesting is the question of whether shuttering the agency is the correct approach in the long run.
While lawmakers complain about the CFPB’s lack of oversight and accountability, closing the agency’s doors could prove difficult to accomplish and counter to some shared political objectives, for example in the area of Fintech. Just this week the CFPB put out a “Request for Information” on data aggregation and Director Cordray spoke on this topic at an event in Salt Lake City, Utah on Thursday. This issue involves consumers, often through third-party web services, accessing their personal, financial information. Aggregating financial account information is beneficial to the consumer and often necessary when using consumer tools for financial management. However, a number of institutions have prevented this aggregation of their customers’ data. The CFPB is looking into the overall issue and seems poised to force access.
Many Republican lawmakers use FinTech to exemplify innovation in the economy and believe policies should support this innovation. Those same Republican lawmakers wanting to end the CFPB should expect fierce opposition from consumer advocates and can look forward to answering difficult questions on how to close down an agency working on an issue important to an industry they promote.
Short of shutting down the agency, a number of options exist to weaken the CFPB and bring additional accountability such as creating a 5-member panel and providing the CFPB funds through the Congressional appropriations’ process.
Specifics on handling the CFPB under a Trump Administration are sparse, but the overall goal to weaken the agency is clear. Regardless of the final decision on the fate of the CFPB, it seems Cordray may be the first federal employee to hear the words “you’re fired”.