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» VISIT US ONLINE @ DSNEWS.COM 65 COVER STORY INDUSTRY INSIGHT INDUSTRY INSIGHT INDUSTRY INSIGHT WATERING DOWN THE CFPB With the financial agency on Congress' radar, political veterans say the CFPB is headed for change. By Ryan Schuette Perhaps nothing about Dodd-Frank riles up Republican hardliners as much as the agency it established to police Wall Street after the financial crisis. The brainchild of then-private citizen Elizabeth Warren, the Consumer Financial Protection Bureau came about as a result of the faulty home loans and dishonest credit practices that helped trigger the Great Recession in 2008. There's been no shortage of controversy over the CFPB ever since. Those who've kept a watch on it will remember tense public hearings between Warren and Republican congressmen, grandstanding by politicians on the left and right, and—more recently—the major court decision that ruled the agency's structure unconstitutional. The controversial 2016 election handed Republicans control of both Congress and the White House—and the discretion to go after what's become known as the nation's credit cop. "I think the CFPB is a clear target," former Rep. Jim Moran (D-Virginia) said in an interview with DS News. Obama-era regulations and agencies like the bureau "are right in the bullseye," he said. COP ON THE BEAT It's not hard to see why anti-regulation Republicans dislike the agency. Since opening its doors a few blocks west from the White House, the CFPB has vigorously pursued offenders that range from powerful banks to small-time payday lenders. In its short life, the agency has also played a pivotal role in transforming the mortgage marketplace. Under Director Richard Cordray, for example, the agency has secured more than $11 billion in relief for some 27 million consumers. Its rulemaking forced mortgage lenders to simplify their disclosure forms and verify borrower incomes. Nor was the agency idle on matters of enforcement; the CFPB brought huge banks like Wells Fargo to task over dishonest practices, often levying hundreds of millions of dollars in penalties. Defenders of the agency credit the bureau's wide jurisdiction and independence from Congress for those accomplishments. Dodd- Frank carved out the role from a mess of regulations in place at a bevy of federal agencies, transferring supervisory responsibilities to the CFPB and making it a foremost regulator in the financial services industry. To stave off political manipulation, Democratic lawmakers also isolated the CFPB from congressional appropriations, housing the agency under the Federal Reserve. Controversially, the law also provided the bureau with a director whom not even the president can fire. Those qualities have long been anathema to Republicans—and that's why they're likely to be jettisoned. WHAT'S LIKELY TO CHANGE According to sources, Republicans will likely try to reform the agency, not abolish it outright. "I think there's a belief that the CFPB is relatively popular with the public," said Gary Goldberg, a principal at the D.C.-based law firm Dentons and a veteran staffer for Democrats on the House Financial Services Committee. "It's easier to support a proposal that involves putting [the bureau] into appropriations than it is to support a proposal that would get rid of them altogether." The CFPB's centralized structure will most certainly go, sources agree. GOP officials have long wanted to replace the office of director with a commission, and they'll probably get their wish. Critically, it's likely that Republicans will also try to rope the CFPB budget into the congressional appropriations process. That's important because such a change would give Congress enormous influence over the bureau in terms of what it can spend and on what—which means it might not always receive the funds it needs for, say, enforcement activities. "There's a lot of people who believe that Republicans hostile to the CFPB are pursuing a classic Reagan strategy of defunding," Goldberg said. "If [lawmakers] get rid of the bureau's direct funding source through the Federal Reserve, they could create a situation in which the agency finds itself competing against other agencies for resources." Those who would defend the agency believe such measures could essentially undermine the CFPB's mission, he added. It's also possible the beat itself may change. Bloomberg reports that Mark Calabria, Chief Economist to Vice President Mike Pence, said at a conference recently the Trump administration plans to make changes to financial regulations quickly—and that the CFPB would be part of that effort. "You're going to have to have a CFPB that actually goes after bad actors, rather than trying to make policy decisions that have nothing to do with bad actors," the news outlet quoted Calabria as saying. Calabria couldn't be reached for comment. What he means by "bad actors" remains unclear, but what does seem clear is that changes to the nation's credit cop are on their way—and they could once more transform the mortgage marketplace. 65

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