Over the last year, the CFPB has been especially active in the consumer finance industry, and we anticipate even more next year. In our CFPB2016 series, we look to 2016 and what we expect out of and with respect to the CFPB. This week, we begin by examining how Election 2016 will affect the CFPB.
We are less than a year from Election 2016 and just a few short weeks from the Iowa Caucuses launching primary season. As the key issues in 2016 begin to take shape, expect the CFPB to become a central point, especially once the parties' respective nominees are selected.
There is no denying that the future of the CFPB is a political issue. For the most part (with exceptions), the Democrats favor the status quo of the agency, while the Republicans are critical of its current form and structure. In today's post, we speculate on what the CFPB will look like under our next president.
Of course, we begin with the caveat that there are many other variables, the most important being the make-up and initiative of Congress. Nonetheless, as demonstrated by our current president, the executive branch exerts a great deal of influence on the direction of the CFPB.
So, what happens to the agency if our next president is a Republican? Notwithstanding what the candidates are saying in debates and stump speeches, in my opinion, the CFPB is not going away. Congress and President Obama created the CFPB under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 in direct response to the Great Recession. I cannot imagine a president expending the political capital – even if he or she has the numbers in Congress – to completely “undo” Dodd-Frank and the CFPB. In other words, the CFPB is here to stay!
But, that doesn't mean the CFPB will look the same four years from now as it does today. Over the last few years, there have been several bills introduced to restructure the CFPB. Earlier this year, Rep. Randy Neugebauer (R-TX) introduced H.R. 1266, which would establish a five-member bipartisan commission to oversee the agency. Other bills have attempted to restructure the funding mechanism of the agency. Under the Obama administration, these bills have no chance of becoming law with the threat of a presidential veto. However, if a Republican wins the presidency in 2016, these bills may gain traction, meaning there is a possibility that the CFPB's governing structure or funding mechanism could be changed.
If a Democrat is elected president in 2016, expect the CFPB to continue on its current trajectory. Just last month, Hillary Clinton sent a letter to House of Representatives Democrats expressing her support for the agency and criticism of Republican efforts to “weaken or even destroy the agency.” Directly responding to H.R. 1266, Clinton's letter stated, “Currently, a single presidentially-appointed director leads the CFPB, providing effective and responsive leadership. When a financial institution is breaking the law or ripping off consumers, decisions can be made quickly and forcefully.” Sen. Bernie Sanders (D-VT) and Martin O'Malley have also expressed support for the efforts of the CFPB.
November 8, 2016 is going to be a very important day for the future of the CFPB. Four more years of the current structure will entrench the agency and its power in our post-Great Recession brave new world. On the other hand, at least in 2016, the CFPB is still young enough for Congress and a new president to question its structure and approach.