How, And Why, Republicans Want To Change The Consumer Financial Protection Bureau

Apr 18, 2017

Republicans in Congress are moving closer to unveiling their plan to overturn Dodd-Frank, the post-recession law meant to reform the financial system. Central to their overhaul is to strip independence from the Consumer Financial Protection Bureau.

CFPB touts that it has returned nearly $12 billion to almost 30 million consumers. But a range of industries complain about what they call the agency’s arbitrary way of doing its job.

"Instead of having a speed limit of 55 miles per hour, the limit was 'Drive an appropriate speed under the circumstances,'" says Daniel Delnero, a lawyer for Ballard Spahr which represents companies regulated by CFPB.

CFPB is structured to give it wide latitude over laws passed by Congress. The short-term loan industry has been particularly vocal against this. For example, the proposed "payday loan rule" would forbid companies from making loans to people without first checking if the person could repay it. But, CFPB doesn't specify a litmus for what qualifies as "checking" which, companies contend, leaves them in the dark.

So Republicans want to help companies by taking away this power to write rules, “making the bureau an enforcement agency which is limited to enforcing, to enforcing statutes and regulations that are currently on the books.”

However, consumer advocates say that making CFPB law enforcement vastly shrinks the depth of inspection it can conduct if it spots abusive practices.

For example, after consumers complained about being unable to correct errors on their credit reports, CFPB was able to sweep in and force reforms. It conducted on-site inspections, demanded reports and staff interviews, and that led to major reforms at the credit bureau.

"Consumers are now getting their errors fixed more quickly and banks and other lenders are being more careful to make sure the information they are giving, information that is accurate," says Rohit Chopra, a fellow at the left-leaning Roosevelt Institute.

Republicans have been advocating for changes to the CFPB since it was created in 2010, and now with both houses of Congress and a Republican president in the White House, they hope they’ll be able to rein in the CFPB.

A previous version of this story indicated the "payday loan rule" was finalized. It is not, and could still change to incorporate industry complaints.

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