Who’s the Boss?

This week sparked contention over who would be taking the helm following Cordray’s departure. Although Cordray had named his deputy director as acting head while a replacement was sought, it seems the White House already had a replacement in mind. Nick Mulvaney, who until recently served as director of the White House Office of Management and Budget, has been appointed as the CFPB replacement pick. In addition to spreading further uncertainty and confusion over the organization’s fate, the move caused a stir in Washington among those wanting to protect the bureau and those who want to see it scaled-back. Supporters of the CFPB fear that Mulvaney, a known critic of the organization, would seek a drastic overhaul of its authority and oversight. A lawsuit has been filed to determine who has rightful claim as CFPB replacement.

ISO: CFPB Replacement

While the legal battle ensues, questions remain. If you’ve been following the recent events, you know that even if question of acting director is settled, a permanent replacement pick must be found. Whomever the final candidate may be, they require senator confirmation – and that’s sure to be a process in itself. With the CFPB such a contentious topic among lawmakers, there’s going to be some impassioned arguments on both sides of the issue.

What it Means for Consumers

You may be wondering how all this fighting on Capitol Hill affects you. Well, the CFPB has its hand in a number of factors that affect you, as a consumer directly. The CFPB provides education and resources for consumers to make the relationship between you and the financial industry more transparent and accessible. It also provides regulatory oversight, protecting you from deceitful and predatory practices.

What exactly is the CFPB?

You’ve probably heard of the Consumer Financial Protection Bureau, but you may not be entirely sure what it actually does. For those of you who aren’t aware, the CFPB is governmental oversight and regulating body that monitors the financial industry and protects consumers from predatory or unethical behavior. The bureau was formed as a measure under the Dodd-Frank Act, the legislation that provided much of the framework for our financial regulation post-recession. Its strict oversight and regulation has definitely come as a benefit to consumers, but businesses and banks have railed against it for its perceived overreach and autonomy. Along with regulatory oversight, the CFPB also provides a platform to empower consumers. In addition to providing educational resources to consumers, the bureau has made complaint filing much more accessible improving transparency between consumers and the banking industry.

Uncertain future the bureau

Many Republican lawmakers have expressed criticism over the CFPB. Additionally, it has long been the subject of attack from the Trump Administration. Many experts believe that, with Cordray’s departure the bureau will almost certainly be placed in the cross-hairs as the administration considers a major financial regulation review.

Last week, President Trump ordered a review of major banking regulations put in place following the 2008 financial crisis, largely comprising Dodd-Frank regulations. President Trump has made clear that rollbacks are a main objective for these reviews. Though the executive order only calls for a review, the Trump administration aims to make major cuts to banking regulations, largely affecting Dodd-Frank’s enforcement measures: Volcker Rule and the Consumer Financial Protection Bureau (CFPB). Here is an overview of the two main components of the Dodd-Frank banking regulations and what it means if they are cut:

The Volcker Rule

A big part of Dodd-Frank, the Volcker Rule raises capital requirements for banks and limits trading abilities. Banks are restricted from certain investment activities using their own accounts and also from retaining control over covered funds. The Volcker Rule acts to prevent speculative trading. If cut, big banks could be free to make unstable investment decisions.

Consumer Financial Protection Bureau

Another major component of Dodd-Frank, the CFPB was established by congress as a means of hands-on banking regulation and enforcement. The CFPB acts to protect consumers from aggressive and predatory investment banking and trading practices. In addition to taking legal action against unfair and deceptive practices, the CFPB also serves as an educational resources for consumers and investors. If cut, banking regulation could once again become largely decentralized and unable to accurately oversee banking practices.

Effects

Bankers and lenders laud President Trump’s decision to review current financial regulation under Dodd-Frank. Wall Street saw a noticeable bump in banking stock prices following Friday’s announcement. Despite lender and broker-dealer optimism, many consumers and regulators worry that loosened regulations will lead to a financial relapse and market crash.

Educational Resources

• See this report from Reuters for more info on President Trumps order for regulatory review
• Find out more about the CFPB by visiting their website
• Get more consumer news and tips by checking out our past blogs