United States: Under Trump Administration, Dodd-Frank And The CFPB Continue To Face Challenges

The Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank, was enacted in 2010 in response to the financial crisis. Through Dodd-Frank, the Consumer Financial Protection Bureau (the CFPB) was created. The CFPB has the authority to pursue actions against financial institutions for unfair or deceptive practices. For instance, it was the CFPB that brought an action against Wells Fargo for opening accounts without their clients' consent, which resulted in a $100 million fine against Wells Fargo.¹ The CFPB contends that it has obtained $11.7 billion in relief to consumers from its enforcement actions.

Despite protecting consumers, Dodd-Frank and the CFPB are not without their critics, and continue to face challenges from the different branches of government. On February 3, 2017, President Trump commented: "we expect to be cutting a lot out of Dodd-Frank."² That same day, he issued an Executive Order, only a page and a half long in length, which provides that his administration will regulate the U.S. financial system consistent with certain principles of regulation, known as the "Core Principles."³ These Core Principles reportedly include: empowering Americans to make independent financial decisions; fostering economic growth and vibrant financial markets through more rigorous regulatory impact analysis; making regulation efficient, effective, and appropriately tailored; and rationalizing the federal financial regulatory framework. The Executive Order also mandates that, within 120 days of the Order (or by June 3, 2017), the Secretary of the Treasury must consult with the heads of the member agencies of the Financial Stability Oversight Council and report back to the President. The report must advise how existing laws promote the Core Principles, what actions currently are being taken in support of them, and identify what laws inhibit them. A few weeks after the Executive Order was issued, on February 14, 2017, bills were introduced in the House (H.R. 1031) and Senate (S. 370) to eliminate the CFPB.

The CFPB's structure is also under review by the courts. Last year, a federal appellate court found that the CFPB was unconstitutionally structured because, as an independent agency headed by a single director, it departs from "settled historical practice".⁴ Specifically, independent agencies historically have been headed by multiple commissioners, directors, or board members. This multi-member structure provides a critical check on one's power, which reduces the risk of arbitrary decision-making and helps protect individual liberty. The federal appellate court found that the CFPB is headed by a single director who has more unilateral authority than any other officer in the three branches of government, other than the President. Furthermore, the CFPB director is only removable for cause. In fact, not even the President can remove the CFPB director under the applicable statute. As such, the federal appellate court held that the CFPB was unconstitutionally structured, and remedied this violation by severing the for-cause removal provision in the statute. The court also determined that the CFPB should operate as an executive agency (as opposed to an independent agency), which would permit the President to supervise, direct, and remove the CFPB director at any time. However, on February 16, 2017, this ruling was vacated when the appellate court granted CFPB's petition for a rehearing en banc. Oral argument for the rehearing en banc is set for May 24, 2017.

The recent challenges to Dodd-Frank and the CFPB have been the subject of recent media attention and public scrutiny, raising questions about the future of the Act and agency. One thing seems certain, though, Dodd-Frank and the CFPB will not be completely eliminated, or even changed, without a fight. As one article aptly recognized: "[i]t has taken seven years to put in place the regulatory strictures imposed on Wall Street. They won't be removed fast or easily..."⁵

Footnotes

[1] Laurence Arnold and Elizabeth Dexheimer, "Trump's Shot to Defang Dodd-Frank Consumer Bureau: QuickTake Q&A," Bloomberg.com (Feb. 16, 2017). Avail. at: https://www.bloomberg.com/news/articles/2017-02-17/trump-s-shot-to-defang-dodd-frank-consumer-bureau-quicktake-q-a

[2] Remarks by President Trump in Strategy and Policy Forum. The White House, Office of the Press Secretary. (Feb. 3, 2017). Avail. at: https://www.whitehouse.gov/the-press-office/2017/02/03/remarks-president-trump-strategy-and-policy-forum

[3]Presidential Executive Order on Core Principles for Regulating the United States Financial System. The White House, Office of the Press Secretary. (Feb. 3, 2017). Avail. at: https://www.whitehouse.gov/the-press-office/2017/02/03/presidential-executive-order-core-principles-regulating-united-states

[4] PHH Corporation, et al v. CFPB, Case No. 15-1177 (D.C. Cir. 2016).

[5] Robert Schmidt, Jesse Hamilton, and Elizabeth Dexheimer, "Dodd-Frank's Tentacles Go Deep. They Won't Be Cut Fast or Easily," Bloomberg.com (Feb. 6, 2017). Avail. at: https://www.bloomberg.com/politics/articles/2017-02-06/dodd-frank-s-tentacles-go-deep-they-won-t-be-cut-fast-or-easily

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