All Things FinReg


The election of Donald J. Trump as president and continued Republican control of both the US Senate and House of Representatives may provide the new president the opportunity to immediately remake the Consumer Financial Protection Bureau (CFPB) after he takes office in January 2017.

When a panel of the US Court of Appeals for the District of Columbia Circuit held in October that the structure of the CFPB is unconstitutional, we wrote that the flaw was cured by converting the CFPB’s director from a position that may only be terminated “for cause” to one where the director, as with other administration appointees, serves at the president’s pleasure (see PHH Corporation v. CFPB).

If the panel’s decision stands, we anticipate that incumbent director Richard Cordray will be terminated by President Trump and that a new director—subject to confirmation by the Republican Senate—would reflect a more conservative and pro-business viewpoint in enforcement and regulatory actions. If, on the other hand, the panel’s decision is reversed and the “for cause” provision remains, Director Cordray’s appointment will not expire until 2018.

A new director could reshape enforcement policy by providing greater clarity to the meaning of the CFPB’s primary authority, which prohibits “unfair, deceptive, or abusive acts or practices,” as well as by affording businesses a better opportunity to be heard prior to being required to expend vast resources on producing documents and witnesses in CFPB investigations. A new director could also withdraw or change important regulatory proposals now awaiting finalization that relate to pre-dispute arbitration and high-interest lending, or could amend rules that have already been adopted.

Finally, the new Congress, without the concern of a presidential veto, is likely to take up amendments to the CFPB’s authorizing statute contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act by placing the CFPB under the standard agency appropriations statutes, Congressional oversight process, and administrative procedures requirements, or by replacing the single-director structure with a multi-member commission leadership structure similar to the leadership of other independent agencies (e.g., the Securities and Exchange Commission and Federal Trade Commission, among others).

Such a decision might only result in shifting investigations to the state attorneys general, who largely possess the same investigative authority under their own state laws and often have the authority to enforce the CFPB’s consumer protection statute in federal court. Moreover, some of those attorneys general may choose to work together in multistate investigative task forces or to retain contingent fee plaintiffs’ lawyers to act as outside counsel.

Much of this remains fluid and will depend on actions that the CFPB may choose to take in challenging the panel decision, which could include petitioning for a rehearing, a rehearing en banc, or petitioning for certiorari to the Supreme Court. It will also depend, of course, on the priorities of the Trump administration and Congress.