Donald Trump will be the next president, and the American consumer may be left on their own.
During the election cycle, the candidates’ views on consumer protection were buried under other more hot-button issues. Despite consumer protection’s relevance to everyone – case in point: a massive banking scandal by Wells Fargo that bubbled up during the debate circuit — it didn’t achieve the same level of interest as issues like trade and immigration did.
Now President-elect Donald Trump had said he wants to repeal the Dodd-Frank Act, dismantling the Consumer Financial Protection Bureau in the process, while Democrat nominee Hillary Clinton vowed to keep it a strong advocate for ordinary Americans.
Established under the Obama administration through the Dodd-Frank Act in response to the financial crisis of 2008, the CFPB has served as the sheepdog guarding American flocks from a seemingly-endless population of predatory wolves, addressing consumer issues that lax regulation or negligence had left flapping in the wind. Its mission, in part, is to “protect consumers from unfair, deceptive, or abusive practices and take action against companies that break the law.”
In the CFPB’s five-year tenure, the agency has accomplished quite a lot to protect the interests of consumers, fielding complaints and taking action against unlawful and harmful business practices. Actions taken have resulted in over $11.8 billion going back to 27 million consumers, including a $100 million fine against Wells Fargo, which created bank accounts for customers without permission.
The agency also provides information to consumers looking to get a mortgage, a direct way to file a complaint if something goes wrong, has established rules for clearer fee disclosures, and has fought against unfair arbitration. It has taken action against credit card companies for deceptive practices, carnivorous payday lenders, illegal tactics by debt collectors, wrongful mortgage foreclosures, and for-profit colleges.
The agency has never enjoyed bipartisan support. Republicans generally point to the concentrated power wielded by its director, currently Richard Cordray. (Democrats generally point to the alternative board-like management structure—similar to that of the SEC— as too slow and unwieldy to get stuff done.) But the power structure was addressed in a recent Supreme Court case, in which the court tweaked it to allow the president to remove the director at will. It was a win for CFPB proponents, settling the GOP’s chief grievance against the agency and keeping its power to help the consumer intact.
However, it’s not clear whether that tweak will satisfy Donald Trump—he never provided detail on his position; he’s only consistently announced his plans to dismantle Dodd-Frank and indirectly bashed the CFPB on his website.
Taking Dodd-Frank apart isn’t necessarily easy, but it’s made much easier by the fact that the Republican party will control the executive branch, both houses of Congress, and will likely appoint a Supreme Court justice sympathetic with Republican ideology, which has been so hostile to Dodd-Frank. Right now, an anti-Dodd-Frank bill exists, called the “Financial Choice Act,” and it’s being pushed by longtime CFPB critic Rep. Jeb Hensarling, a Texas Republican who has received significant campaign contributions from the financial industry that would benefit from less oversight.
Currently in limbo in a House subcommittee, the Financial Choice Act, if passed, would effectively kill the CFPB, declawing it significantly and renaming it the Consumer Financial Opportunity Commission. The CFOC would gain a board-like structure, and be subject to stricter congressional oversight, potentially crippling its effectiveness to move quickly for consumers.
If Trump does end up getting rid of the CFPB through Hensarling’s Financial Choice Act, you may be on your own when it comes to dealing with predatory financial companies trying to take advantage of you. If it’s replaced with something less powerful, you will lose your direct complaint line to an agency that can do something.
Without a CFPB, you may be without a financial police force that keeps predatory lenders looking to trap you and from for-profit colleges from leaving you and your family in debt without the skills you paid for. You may be at the mercy of the bank if it illegally forecloses on your house. You may not be able to have your day in court if something goes wrong, instead forced into disadvantageous arbitration without the benefit of your fellow consumers banding together with you.