While the CFPB has been busy revamping debt collection rules, including those required by the Fair Debt Collection Practices Act (FDCPA), lawmakers are doing a bit of revamping of their own. Earlier this month, the Financial CHOICE Act passed the House Financial Services Committee by a vote of 30-26.
Largely intended to repeal certain aspects of Dodd-Frank, the CHOICE Act also takes aim at the CFPB. Specifically, it provides for restructuring the CFPB to achieve greater oversight and accountability and to address recent challenges to the regulator’s unbridled authority. Proponents of the legislation, including Chairman Jeb Hensarling (R-TX), tout it as providing economic growth for all and bailouts for none.
While the proposed changes to the CFPB are numerous, highlights include:
- Rebranding the CFPB as the “Consumer Financial Opportunity Commission” to focus not only on consumer protection, but also on market competition.
- Replacing the current single director with a bipartisan, five-member commission, subject to congressional oversight.
- Requiring funding from congressional appropriations rather than through transfers from the Federal Reserve as provided by Dodd-Frank.
- Establishing an independent Inspector General for the “Commission” to deter misuse of federal funds.
- Increasing the threshold for bank supervision from $10 billion to $50 billion in consolidated assets.
- Providing defendants in administrative actions the right to remove cases to federal court.
- Clarifying that Dodd-Frank’s three-year statute of limitations applies to administrative actions initiated by the Bureau.
- Allowing recipients of civil investigative demands the right to challenge those demands in federal court.
- Repealing indirect auto lending guidance.
- Repealing authority to prohibit pre-dispute arbitration clauses in financial services contracts and the authority to ban products or services deemed “abusive.”
The proposed changes address a host of hot-button concerns with the CFPB’s authority and aggressive enforcement priorities, including issues raised in the closely watched case of PHH Corp v. Consumer Financial Protection Bureau. As we previously reported, a central issue there is whether the CFPB’s unprecedented single-director structure is unconstitutional. During oral arguments, a panel of the U.S. Court of Appeals for the District of Columbia, signaled concern over the CFPB’s structure. Although a decision is expected this year, further appellate action is nearly guaranteed.
The CHOICE Act is not the only current attempt to curb the CFPB’s broad authority under Dodd-Frank. In July, the House of Representatives approved a fiscal year 2017 appropriations bill (H.R. 5485, the Financial Services and General Government Appropriations Act) containing similar measures. Like the CHOICE Act, the House appropriations bill would require CFPB funding through congressional appropriations and would replace the single-director leadership with a five-member Board of Directors appointed by the President. It would also restrict the CFPB’s ability to regulate pre-dispute arbitration agreements among other limitations.
Many industry voices, as well as lawmakers, demand a check on the CFPB’s authority, as this proposed legislation makes clear. Whether that check becomes reality, however, will likely remain a partisan battle with the presidential election looming large in the background.