Consumer Law & Policy Blog

Trump's Transition Team: Dismantle Dodd-Frank

The statement is here.  Excerpt:

* * * Federal policy should focus on free enterprise, while protecting consumers by policing markets for force and fraud.  Both Wall Street and Washington should be held accountable. 

Following the financial crisis, Congress enacted the Dodd-Frank Act, a sprawling and complex piece of legislation that has unleashed hundreds of new rules and several new bureaucratic agencies.  The proponents of Dodd-Frank promised that it would lift our economy. Yet now, six years later, the American people remain stuck in the slowest, weakest, most tepid recovery since the Great Depression.  Paychecks have been stagnant.  Savings are being depleted, millions are unemployed or underemployed, and millions more have dropped out of the workforce altogether.  Economic growth remains below 2%, about half the historic average.  The big banks got bigger while community financial institutions have disappeared at a rate of one per day, and taxpayers remain on the hook for bailing out financial firms deemed "too big to fail." 

The Dodd-Frank economy does not work for working people.  Bureaucratic red tape and Washington mandates are not the answer.  The Financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation.

Bloomberg BNA: Trump Presidency Creates Uncertainty for Arbitration Rules

Here. The entire article is worth reading, but I've pasted in an excerpt below.  (HT: Gregory Gauthier)

“Trump and his businesses seem to have been big proponents of arbitration, using it as a way of getting disputes out of courts and therefore out of the public eye,” defense attorney Liz Kramer told Bloomberg BNA. Kramer, of Stinson Leonard Street LLP in Minneapolis, writes for her firm's blog Arbitration Nation.

“Given his overall ‘change' message, and repeated criticism of all things Obama, my gut tells me his administration will roll back these regulations,” she said.

Defense attorney Alan S. Kaplinsky, who leads the consumer financial services group at Ballard Spahr in Philadelphia, agreed. The election could, in particular, “spell very bad news for the CFPB” and its regulatory efforts, including those aimed at limiting class action waivers in credit card agreements and other financial service products, he said.

“Proposed rules pertaining to arbitration and small dollar lending are in jeopardy,” he said.

* * *

Plaintiffs' attorney Deepak Gupta, a prominent opponent of arbitration, agreed that Trump's “mandate reflects a deep distrust of Wall Street and the financial system” and that might work in favor of consumers and workers.

“Nobody really thinks he was elected because his supporters think Wall Street should get a free pass,” said Gupta, the founding principal of Gupta Wessler PLLC, a Washington public interest law firm.

American Banker: CFPB's Precarious Future Under Trump

Here (free content, I think). Excerpt:

While Republican lawmakers are likely to focus on efforts to replace the agency's single director with a bipartisan five-member commission, as well as subject it to the Congressional appropriations process, Trump may seek to take more immediate action once he takes office in January. Some said he could either pressure Cordray to leave or seek to do so directly given a recent appeals court ruling that allows a president to remove a CFPB director without cause.

"Even if the CFPB does appeal, Trump could remove Cordray and appoint a new director who would drop the appeal," said Justin Schardin, director of the Bipartisan Policy Center.

Whether Trump could succeed is unclear, and is likely to turn on whether the CFPB can convince a higher court to delay a decision in the case of PHH Corp v. CFPB.

"As long as the PHH decision is stayed pending further appeals, the director can only be removed for 'inefficiency, neglect of duty, or malfeasance in office,'" said Benjamin K. Olson, a partner at BuckleySandler and a former CFPB deputy assistant director for the Office of Regulations. "That is a high standard."

* * *

[Consumer Bankers Association Chair Richard] Hunt called a bipartisan commission structure for the CFPB "a no-brainer" and chided Democrats for not agreeing earlier to create a commission structure, which would have ensured "the CFPB would be in existence for as far as the eye can see."

"Now [the CFPB] is in jeopardy," Hunt said. "It is ironic that here we are at the CBA as defenders of the CFPB because the last thing we want is a whipsaw effect every two years."

Law360: House GOP To Drive Trump’s Banking Policies

Here (behind paywall).  Excerpt:

While his lack of clarity has left many in the financial services industry wondering what Trump’s win will mean, the presence of Pence in the No. 2 spot is likely to provide a good clue.

* * *

“He’s going to be in an enormously powerful position to influence policy,” Lynyak said of Pence.

If that prediction holds true, and with the gains the Republicans made in the Senate, then Hensarling’s Financial CHOICE Act, unveiled in June, may serve as a guide to the future of financial regulations.

That bill, which moved out of the House Financial Services Committee on a straight party-line vote where Democrats did not even provide amendments, would not entirely repeal Dodd-Frank.

Instead, it would take a hatchet to the Consumer Financial Protection Bureau by putting a commission at its top rather than a single director and putting its funding into the hands of Congress.

National LJ: Trump's Election Could Upend Consumer Protection Bureau

Here (behind paywall).  Excerpt:

The CFPB is expected to appeal the three-judge panel’s decision [in PHH] to the full D.C. Circuit, where Democrat-appointed judges have a majority. But a question hanging over the transition is whether Trump will still try to replace Cordray—either by invoking the D.C. Circuit panel’s decision or finding cause to fire him.

* * *

“To some degree the question is whether the agenda now will be driven by Trumpism or by the GOP, and what the daylight is between the two on issues like this,” said [co-blogger Deepak] Gupta, a former CFPB attorney who testified in favor of the arbitration rule during the agency’s May field hearing.

InsideARM: What Could Trump’s Presidency Mean for the Debt Collection Industry?

Here. Excerpt:

It will be interesting to see what Cordray attempts to accomplish between now and January 21, 2017. One thought is that he might try to focus on finalizing those rules that have already been out for public comment – payday and arbitration.

With the completion of the debt collection SBREFA hearing in August, debt collection rulemaking had finally entered the next phase. It now seems likely that the completion of this rulemaking will be overseen by a new regime, which may well be a positive outcome for the ARM industry.

Some First Thoughts on What the Election Means for the Consumer Financial Protection Commission

by Jeff Sovern

It looks like the Republicans have captured the presidency and both houses of Congress, but that the Democrats will retain enough Senate seats to use the filibuster to block legislation, assuming the filibuster rules don't change.  Filibusters cannot be used to prevent confirmation of most presidential nominees, but can still be used to prevent Supreme Court confirmations, though that may change.  What does all this mean for the Consumer Financial Protection Commission?

This will be the first presidential transition during the life of the CFPB, so we don't have any history to go on.  But here are some quick thoughts. As we previously posted, the GOP platform is very critical of the Consumer Financial Protection Bureau. It says, for example: "The worst of Dodd-Frank is the Consumer Financial Protection Bureau, deliberately designed to be a rogue agency. . . . If the Bureau is not abolished, it should be subjected to congressional appropriation. . . . ." President-elect Trump has expressed disapproval of the Dodd-Frank Act generally, though as far as I know, he has not expressed an opinion about the CFPB specifically. He has also complained about excessive regulation. It thus seems like a real possibility that the GOP will seek elimination of the CFPB.  Unless the filibuster rules change, though, Democrats can block that move.

Another GOP option would be to seek appointment of a CFPB director who would rescind or modify existing CFPB regulations and cease attempts to promulgate new consumer protections. The Dodd-Frank Act provides that the director will serve a five-year term and can be removed only for cause.  But the DC Circuit’s PHH decision removed the “for cause” limit, meaning that unless that decision is stayed, the new president could fire the director on day one.  Even if PHH is stayed or overturned, the term of the current director, Richard Cordray, expires in 2018, or he may choose to leave before then, perhaps to run for office. President Trump could nominate a new director, and under the existing rules, the Senate Democrats could not use the filibuster to block that nomination without Republican help.

Another possibility is that Congress shifts the CFPB to a commission structure, with no more than three members of the commission from the same political party, as some Republican law-makers have proposed and as is true of other federal administrative agencies, including the Federal Trade Commission.  That would presumably address the concerns of the PHH court.  Democrats might possibly agree to that as a compromise measure.  But whether Republicans would still want to do that in light of their victories remains to be seen. If that were the result, the CFPB would be less effective and slower to remedy consumer problems.  But it would still be half a loaf.

 

Man Spends $100,000 to Arbitrate $150 in Citibank Overdraft Fees

CBS MoneyWatch has the story here. (HT: Gregory Gauthier).  Excerpt:

While the arbitrator sided with Dempsey, the ruling proved to be something of a Pyrrhic victory. The decision awarded Dempsey more than $20,500 in actual and punitive damages, as well as $30,000 in attorney fees, or about one-third of Dempsey’s legal costs. Since Citibank has appealed the ruling, Dempsey is now preparing for another round.

 

Odinet & White Paper on the CFPB's Proposed Debt Collection Rules

Christopher K. Odinet and Roederick C. White Sr., both of the Southern University Law Center, have written Regulating Debt Collection, Review of Banking and Financial Law, 2017 (Forthcoming).  Here is the abstract:

Debt collection. It often starts as a late night call carrying threats of being thrown in prison, ruin at the workplace, and trouble for the family unless you pay up. While the law actually prohibits some of these tactics, most consumers do not know their legal rights, which leave much to be desired, or fail to exercise them when faced with the harassing practices of some debt collectors. Moreover, the debt collection industry as a whole — both massive and sophisticated — lacks the incentives to self-police or internally punish bad actors. In July 2016 the Consumer Financial Protection Bureau released a proposal aimed at overhauling the entire debt collection industry — both as to how collectors interact with consumers and how debts are bought and sold. Consumer protection groups have lauded the new rules as a win for average Americans, while consumer credit firms caution that some of the provisions go too far and risk crippling the collection industry, which would have an adverse effect on the ability of people to obtain the type of everyday credit that makes the wheels of the economy turn. This Article explores the proposed rules and critiques the places where they fall short or go too far, as well as considers future developments and issues that will arise from their enactment. 

Nothing in Debates on Consumer Law--or Banking: Sad!

by Jeff Sovern

Some reactions from Politico's Morning Money:

TOP EMAIL from Richard Hunt, President & CEO of the Consumer Bankers Association: “Four debates and no Wall Street or bank bashing. Didn't see that coming.”

* * *

Cowen’s Jaret Seiberg: “Sec. Hillary Clinton and Donald Trump have now faced off in three presidential debates without a material discussion of banks or housing. This tells us that Congress will likely shape banking policy with either Sen. Elizabeth Warren or Rep. Jeb Hensarling taking lead depending on the winner.

“For housing, we see both candidates as a positive though Trump may be better for Fannie and Freddie. … To us, the most important takeaway from the three debates is that neither Clinton nor Trump have emphasized any policies for banks or for housing. It is just not at the top of their agendas. That means there is not an election mandate to address either issue.”

Personally, I'm skeptical about the mandate idea.  The new president will pursue his or her agenda, and the members of Congress will pursue theirs. I doubt many participants will change their behavior based on a perceived mandate--which is not to say that they won't claim a mandate to accomplish their goals.  But the candidates have voiced policies in the area, though not in the debates.  For example, Clinton has applauded the CFPB and its proposed arbitration rule, while Trump has criticized Dodd-Frank, though without being very specific about which parts of Dodd-Frank he would repeal.