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CFPB's Precarious Future Under Trump
Friday, November 11, 2016 6:45 AM

The Consumer Financial Protection Bureau faces an uncertain and precarious future under President-elect Donald Trump, who some say might seek to oust Director Richard Cordray and boost legislation to significantly weaken the agency.

During the campaign, Trump did not specifically endorse any plan to alter the CFPB, though he repeatedly sparred with its founder, Sen. Elizabeth Warren, D-Mass.

While Republican lawmakers are likely to focus on efforts to replace the agency's single director with a bipartisan five-member commission, as well as subject it to the Congressional appropriations process, Trump may seek to take more immediate action once he takes office in January. Some said he could either pressure Cordray to leave or seek to do so directly given a recent appeals court ruling that allows a president to remove a CFPB director without cause.

"Even if the CFPB does appeal, Trump could remove [CFPB Director] Cordray and appoint a new director who would drop the appeal," said Justin Schardin, director of the Bipartisan Policy Center.

Whether Trump could succeed is unclear, and is likely to turn on whether the CFPB can convince a higher court to delay a decision in the case of PHH Corp v. CFPB.

"As long as the PHH decision is stayed pending further appeals, the director can only be removed for 'inefficiency, neglect of duty, or malfeasance in office,'" said Benjamin K. Olson, a partner at BuckleySandler and a former CFPB deputy assistant director for the Office of Regulations. "That is a high standard."

At issue is an October ruling by the U.S. Court of Appeals for the D.C. Circuit that said the agency's single director structure is unconstitutional and the CFPB's director serves at the pleasure of the president. The agency has until Nov. 25 to appeal that decision, either to the entire D.C. Circuit or the Supreme Court. It is widely expected to do so.

Trump is unlikely to seek a complete elimination of the CFPB, observers said.

"Anybody who says the CFPB will be abolished is overstating the case," said one lawyer, who spoke anonymously because he has cases pending before the agency.

What's more likely is that Trump will add momentum to legislative efforts to rein the CFPB. The banking industry has been pushing a bill that would create a five-person board for the agency and subject it to Congressional appropriations.

With Republicans controlling the House, Senate, and White House, the chances for a bill are higher, though by no means certain given Democrats close edge in the Senate.

In addition to restructuring its funding and leadership, many in the industry would like to see the agency's arbitration plan scrapped and an expansion of the examination threshold to $50 billion of assets from $10 billion.

Source for more information: Credit Union Journal