CFPB Overhaul Remains Slow
Time after time Republicans have tried to defang the CFPB.
Make it subject to appropriations. The Senate didn't buy it. Take away its supervisory powers. The Senate again. Abolish it. Nobody could get that done.
But with the departure of Richard Cordray, President Trump can select his own person to run the agency.
For the time being, Office of Management and Budget Director Mick Mulvaney is serving as interim director until Trump nominates a permanent director.
Any Trump selection will have to be confirmed by the Senate, where Democrats are certain to object to the choice. But there's little they can do about it.
In decades past, nominees such as the director of the CFPB could be subject to a filibuster; that would mean it would take 60 votes to approve the nomination. That is no longer the case. In 2013, with Senate Republicans blocking some Obama Administration nominees, Senate Democrats pushed through a rule change that prohibits filibusters for most nominees.
But the nominee still is likely to face grilling from the Democrats, said former NCUA Board Chairman Geoff Bacino, now a partner with Bacino & Associates.
“I would expect that Democrats will put up a big fight and examine every aspect of the nominee's background,” he said.
The CFPB has become a lightning rod for the philosophical differences between the parties, John McKechnie, senior partner at Total Spectrum, said.
“Senate Banking Committee staff on both sides of the aisle are already saying that a bruising confirmation battle is certain, regardless of who the president selects,” he said. “That's because the CFPB, since day one, has been a metaphor for how liberals and conservatives view government. So there's a tremendous amount of simmering ideological anger about to boil over when the nominee gets to the Senate.”
Several names for possible nominees for the agency include House Financial Services Chairman Jeb Hensarling (R-Texas) and Keith Noreika, who served as acting comptroller at the Office of Comptroller of the Currency.
Hensarling has been the primary sponsor of legislation to greatly reduce the agency's powers. Noreika and Cordray recently had a public battle over the agency's rule to restrict mandatory arbitration agreements.
Congress nullified those rules.
Ultimately, Democrats have little leverage over whether a nominee will be confirmed.
Still, the nomination and confirmation processes take time. And McKechnie said he expects Mulvaney to do more than simply keep the seat warm for a permanent director.
“From the outside, Mulvaney's approach will appear methodical, but I suspect internally he will be aggressive in putting a stop to some of the more activist CFPB enforcement and rulemakings that he has objected to in the past,” he said. “I don't think President Trump put him in place to be a caretaker.”
Once a nominee is confirmed, that person will be walking into an agency filled with people hired by Cordray and his staff. Those people are used to approaching their jobs with a certain regulatory zeal that a Trump nominee likely will reject.
With the exception of the director, “Everyone else is a career employee,” Ryan Donovan, CUNA's chief advocacy officer, said.
“You’re not going to be the most popular person in the world [and you shouldn't] expect to be,” Bruce Jolly, an attorney with Reed & Jolly, said.
Mulvaney or a permanent nominee are likely to want to take the agency in a vastly different direction than Cordray. Mulvaney already has announced a 30-day moratorium on regulations and a 30-day hiring freeze.
Any new director is likely to focus on enforcement issues before trying to repeal or change rules, NAFCU President/CEO B. Dan Berger said.
“Given the bureaucratic nature of rulemaking, it will not be quick or easy to rescind rules,” he said, adding, “What took years to put in place will likely not be changed overnight.”
Repealing rules falls under the Administrative Procedures Act, attorney Kathy Winger said. The process is the same as repealing rules and requires publication and public comment periods.
“Not surprisingly, this takes some time,” Winger said.
Rules that are not finalized are easier to hold back, she added.
Bacino said most agencies are governed by boards, which set policy. But since the CFPB is governed only by a single director, that person sets all of the policy. He said a new director could ease up on enforcement, or simply choose to ignore certain rules.
But on the regulatory side, Mulvaney last year was one of more than 300 House members who signed a letter to Cordray saying that the agency was not taking the size of an institution into account when it issued rules. The letter asked that Cordray exempt community banks and credit unions from certain rules.
Berger said he hopes that Mulvaney and any permanent director concentrate on the large banks that caused the economic crisis.
And the trade groups hope that even though Mulvaney has issued a moratorium on new rules, he won't ignore rules the agency has already issued.
“When it comes to credit unions, what we need, and what NAFCU will continue to push for, is relief from regulations that were meant for the institutions that were responsible for the financial downturn,” Berger said.
And that means looking back at rules the agency has already issued.
“We’re hoping that no new regulations doesn't mean they’re not going to fix existing ones,” Donovan said.