Consumer Law & Policy Blog

House to Consider Financial Choice Act Bill to Cripple CFPB Week of June 5

So says The Hill.

My American Banker Op-ed: Would Wells scandal have come to light with a defanged CFPB?

Here.  Excerpt:

Wells Fargo’s opening of millions of phony accounts using the names of its customers was perhaps the most significant bank scandal to come to light since the financial crisis. But Hensarling’s Financial Choice Act, which passed the House Financial Services Committee, would have weakened federal regulators’ ability to publicize the scandal and punish Wells. * * *

If the bill had been enacted — and the consumer bureau were just a shell of the agency it is today — it is a fair question to ask whether Wells Fargo would have been held accountable for its actions.

The op-ed is based in part on my forthcoming Rutgers Law Review article.

Chris Odinet's PHH Oral Argument Report

Over at PropertyProf Blog.

Time.com: Buried in Trump's Budget: A New Attempt to Kill a Powerful Consumer Watchdog

Here. The whole article is worth reading, but here's an excerpt:

Buried deep in President Donald Trump’s 2018 budget request to Congress—specifically, on page 158 out of 159 pages in the supplemental "Major Savings and Reforms" document—is a section headed “Restructure the Consumer Financial Protection Bureau.” It appears to be yet another Republican shot across the bow against the embattled consumer protection agency—but in this case, it's an action Congress currently has no authority to implement.

* * *

Trump’s $4.1 trillion budget—which was presented to Congress on Tuesday—proposes to restructure the CFPB, limit the agency's mandatory funding in 2018, and provide discretionary appropriations to fund it beginning in 2019. The budget estimates that this "restructuring" will yield a cost savings of $6.8 billion of the next 10 years. When you consider that the CFPB’s budget for the fiscal year of 2016 was roughly $600 million, however—just under a 10th of that amount—such a move sounds more like total elimination.

* * *

Currently, the CFPB’s funding comes from the Federal Reserve, not Congress. So Trump’s budget seems to assume that the agency’s budget will fall under Congressional control at some point this year.

“We’re scratching our heads, especially when you consider the CFPB is not funded by taxpayer money,” [Allied Progress executive director Karl] Frisch says. “I don’t know how you can cut something from the budget that isn’t in the budget.”

 

 

 

 

More from Leah Litman on the PHH Case

by Jeff Sovern

We posted the first part of California-Irvine professor Leah Litman's take on the PHH case last week.  Here is part two. Professor Litman offers a perspective on Humphrey's Exec, the Supreme Court case that held an independent agency--there, it was the Federal Trade Commission--was constitutional. I have wondered for some time how the original PHH panel could reconcile its view that an agency helmed by a single director is unconstitutional with the Supreme Court's determination that a five-member commission is fine.  Professor Litman's answer is that the panel didn't. She wrote:

The panel in PHH had to conclude (and it was apparent from the opinion that it did conclude) that the Supreme Court’s decisions in Humphrey’s Executor v. United States, Wiener v. United States, and Morrison v. Olson were all wrong.  * * *

On Humphrey’s Executor, the panel wrote:

“In 1935, however, the Supreme Court carved out an exception to … Article II by permitting Congress to create independent agencies that exercise executive power.”

The panel elsewhere described Humphrey’s Executor as “notwithstanding Article II.” The panel did not describe Wiener v. United States above the line.

Maybe if you think constitutional decisionmaking should proceed anew issue by issue, the panel’s treatment of precedent might not trouble you.  I do not share that view. I think there is a reason for respecting precedent (be it judicial precedent or congressional precedent). The decision in PHH discarded decades of precedent with nothing more than a turn of phrase.

WSJ: Banks Want a Piece of the Payday-Loan Pie

Here.  Excerpt:

Financial firms, spurred by the Trump administration’s promises to deregulate, hope to return to offering short-term, high-interest loans after being pushed out of the sector by Obama-era rules. Two leading trade groups, the American Bankers Association and Consumer Bankers Association, recently proposed to Treasury Secretary Steven Mnuchin several steps they say would encourage banks to offer such loans.

The groups call for scrapping 2013 guidelines that forced banks to virtually abandon the market. Also on their wish list: blocking the Consumer Financial Protection Bureau from rolling out the sweeping rules on payday lending proposed last year, which they say would hamper their return to the sector.

PHH Oral Argument Next Wednesday, the 24th, Could Decide CFPB's Fate

Here is a Reuters story to bring you up to date. And here is California-Irvine professor Leah Litman's take on the case.

House Expected to Vote On Financial Choice Act to Cripple CFPB (Gulp) in June

Here.

150+ Consumer Protection Academics Join Letter Opposing Financial Choice Act CFPB Provisions

Here.

Two Columns Make Strong Case For Preserving Strong CFPB and Against Financial Choice Act

One is by my co-author, Chris Peterson, in the Salt Lake Tribune. Here's an excerpt:

[The Financial Choice Act] imposes the absurd requirement of an exhaustive economic study every time the agency opens a law enforcement case. The bill even creates a special exception prohibiting any law enforcement cases against payday lenders. Most astonishing, the bill actually eliminates the federal prohibition of "deceptive acts or practices" that the CFPB has used in court to provide over 90 percent of its restitution to the public — because, apparently, we need more deception in the consumer finance industry?

The other piece is by LA Times columnist David Lazarus, and headlined Banks, making record piles of cash, plead for 'much-needed regulatory relief'. It responds to claims that the Dodd-Frank Act has created a regulatory burden which has crippled banks.  Excerpts:

• U.S. banks reported record annual profit of $171.3 billion last year, up 5% from a year before, according to the Federal Deposit Insurance Corp. Only 4.2% of the nation’s almost 6,000 banks lost money in 2016 — the lowest percentage since 1995.
• FDIC-insured institutions reported total profit of $43.7 billion in the fourth quarter alone, up nearly 8% from a year earlier. Almost 60% reported year-over-year growth in quarterly earnings.

* * *

• Wells Fargo, which went out of its way to alienate customers with its bogus-accounts scandal, nevertheless saw its first-quarter profit hold steady at $5.5 billion.

“Banks need regulatory relief like a bald man needs a comb,” said Linda Sherry, a spokeswoman for the advocacy group Consumer Action.

Republican members of the House Financial Services Committee who voted to approve Hensarling’s bill received almost 80% more money during the 2016 election cycle from commercial banks and holding companies than Democrats who voted against it, according to the nonpartisan research organization MapLight.