Republican lawmakers and big names on Wall Street have been trying to weaken or abolish the Consumer Financial Protection Bureau since it was created more than five years ago.
Now they might have some leverage.
President-elect Donald Trump says he would “dismantle” Dodd-Frank, the legislation that gave birth to the federal consumer watchdog. And his election, combined with the Republican sweep in Congress, gives leverage to the lawmakers and financial groups looking to rein in the independent agency’s powers.
The unfriendly environment in Washington is coming just weeks after the CFPB was dealt another major blow. Last month, a federal appeals court ruled that the agency must be restructured so that the director could be removed at will, marking a major win for Republicans and industry groups looking to limit the independence of the agency.
The agency is widely expected to appeal the ruling, but it’s not clear whether that move would be enough to keep Trump from replacing CFPB director Richard Cordray once Trump takes office. This week, amid growing worries about the future of the CFPB, Cordray sent an email to his staff urging them to focus on the work ahead.
The renewed calls to scale back the financial regulations put in place by the CFPB come a few months after one of the agency’s most significant victories. In September, the agency announced a $100 million fine against Wells Fargo, the largest penalty it has ever issued. The enforcement action, pegged to the news that employees created more than 2 million unauthorized accounts to meet sales quotas, marred the bank’s reputation and led to the resignation of the company’s chief executive John Stumpf.
Still, the move was not enough to quiet critics who argue that the agency needs more checks and balances.
Exactly how Trump would go about disbanding Dodd-Frank and revising the agency is unclear, but possibilities include reorganizing the CFPB’s leadership and getting rid of the agency altogether, analysts said.
In June, Trump met with Jeb Hensarling (R-Tex.), the chairman of the House Financial Services Committee, to talk about his plan for disbanding Dodd-Frank and reorganizing the CFPB, according to a Hensarling aide. The lawmaker’s plan, the Financial CHOICE Act, calls for restructuring the CFPB so that it would be led by a five-member commission instead of a single director.
Some representatives on Wall Street have supported the commission approach, which they say should provide more oversight.
“It would certainly provide for a fair hearing of the issues that come before the CFPB,” said James Ballentine, an executive vice president with the American Bankers Association, a trade group that represents banks.