CFPB, Dodd-Frank reforms won't happen soon, CFPB expert says

By Karen Kidd | Mar 7, 2017

WASHINGTON (Legal Newsline) – Despite legislation to increase the number of Consumer Financial Protection Bureau's directors to five, and support noised by the White House, a consumer financial services attorney active in New York and Philadelphia says not to expect it soon.

Alan S. Kaplinsky, a partner with Ballard Spahr, said during a recent Legal Newsline telephone interview that his opinion about the CFPB bill and similar legislation has changed over the past month or so as he observed practical realities inside the Beltway.

"I don't think any of these bills are on their way to being fast-tracked," he said.

Too many other issues, such as repealing and replacing the Affordable Care Act and dealing with the nation's infrastructure, have pushed reforming the CFPB to the back burner, Kaplinsky said.

"These were things that were mentioned as important to (President) Trump during his campaign," he said. "These other things have a much higher priority than making changes to Dodd-Frank."

The CFPB was created by the Dodd-Frank Wall Street regulation bill, which was signed by then-President Barack Obama on July 21, 2010. The CFPB and its lone director, Richard Cordray, are in an awkward position with Trump in the White House and Republicans in control of Congress.

That is especially true because Trump has been sending strong signals that he wants to roll back Obama-era financial regulations.

On Jan. 31, Sen. Deb Fischer (R-Nebraska) reintroduced a bill that would replace the CFPB's director with a five-member bipartisan board of directors. That would structure the CFPB in a way similar to an earlier version of the Dodd-Frank bill, Kaplinsky said.

"It was set up that way originally, but the Senate took it out," he said.

In a statement issued when she reintroduced the legislation, Fisher said having only one director at the CFPB has been a serious problem.

"For years, the bad decisions made by a single director at the CFPB have kept families locked out of economic opportunity," Fisher said in her statement. "My bill would prevent this misconduct by divesting the authority from one director to a five-member bipartisan board. This much-needed structural adjustment would bring accountability to the bureau and give more Americans a chance to build their own businesses and provide for their families."

A week prior to Fisher's reintroduction of the bill, Cordray told the Wall Street Journal that the CFPB had no plans to stop enforcing existing consumer protection regulations, despite the change in presidents. Last week, in an interview on CNBC.com's Speakeasy with John Harwood, Cordray said the independence of the consumer watchdog CFPB is very much worth fighting for.

"My job is to take the law that has been given me and do the best I can to stand up for people," Cordray said during his interview with Harwood. "And that is what we are doing and it's good work, John. It's really important work."

Cordray's term as director will be up in July 2018, and any change will need support from Democrats in Congress, Kaplinsky said.

"I don't think Cordray is going to resign before then," he said. "And as long as Cordray is there, there is no incentive for the Democrats to negotiate."

But that might change when Cordray's term is up, Kaplinsky said.

"At that point, Trump will have clear sailing to select his own director," he said. "And, at that point, the Democrats will have an incentive to negotiate."

Also to be considered is a court case Cordray and the CFPB are fighting that questions whether the bureau is constitutional. On Feb. 16, the U.S. Court of Appeals for the District of Columbia Circuit granted a CFPB request for rehearing of the case after a three-judge panel on the same court in October granted the White House authority to replace the bureau's director for any reason.

"The opinion made it pretty clear that if there had been a committee, that would have addressed these concerns that the panel had," Kaplinsky said. "The panel was concerned that there was too much power invested in the independent director who is not answerable to the president or Congress."

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