CFPB Budget Targeted in Trump Budget Proposal

By Gregory Roberts

The Consumer Financial Protection Bureau would shrink drastically under the federal spending plan released May 23 by the Trump administration that assumes the agency will soon come under the regular appropriations process.

Trump’s spending blueprint for 2018-27 shows a reduction of $145 million to “restructure” the CFPB in the 2018 fiscal year, of $650 million in the 2019 fiscal year and of more sizable annual reductions after that, for a total cut of $6.833 billion over the 10-year period.

“Restructuring is required to ensure appropriate congressional oversight and to refocus CFPB’s efforts on enforcing the law rather than impeding free commerce,” the administration proposal says.

The budget proposes to limit CFPB funding in 2018 to allow for “an efficient transition period and bring a newly streamlined agency into the regular appropriations process beginning in 2019.”

The CFPB receives funding for its budget, estimated at $636.1 million for the 2017 fiscal year, outside the regular congressional appropriations process, via a draw from the Federal Reserve Board as spelled out in the 2010 Dodd-Frank Act, which created the bureau.

The CFPB declined to comment on the budget outline. The Office of Management and Budget did not respond to a request for comment.

Emptying the Kitty

The cuts in the proposal would effectively reduce the agency’s budget to zero. Offsetting funding, if any, from future inclusion in the regular appropriations process does not appear in the blueprint.

Republicans criticize the CFPB as a rogue agency that stifles businesses and job creation with its regulatory overreach. Democrats defend the bureau as a necessary response to the 2007-08 financial crisis and the abuses that contributed to it. The CFPB reports that it has returned nearly $12 billion to 29 million consumers through its oversight of banks, mortgage and other lenders, debt collectors, and other financial-service providers.

Language in the budget proposal by President Donald Trump, a Republican, echoes his party’s anti-CFPB rhetoric.

“CFPB’s interpretation of the Dodd-Frank Act has resulted in an unaccountable bureaucracy controlled by an independent director with unchecked regulatory authority and punitive power,” the administration proposal says.

Repealing Dodd-Frank

The House Financial Services Committee approved a bill by Chairman Jeb Hensarling, (R-Texas), earlier this month to undo much of Dodd-Frank, including curbing the independence of the CFPB director, sharply curtailing the bureau’s regulatory authority and bringing its budget under the congressional appropriations process. That bill is likely to win approval by the full House but unlikely to pass the Senate, where the Democrats, though in the minority, are empowered by Senate rules to block legislation by solid opposition.

A federal appeals court will hear oral arguments May 24 in a case that challenges the unusual structure of the CFPB.

Under Dodd-Frank, the agency is headed by a sole director who is nominated by the president to a five-year term and confirmed by the Senate and may be removed from office only for cause. In October, a three-judge panel of the District of Columbia Circuit Court of Appeals ruled that arrangement unconstitutional and stripped the “for cause” limitation from the law. The CFPB requested and was granted a rehearing by the full court, and the ruling was put on hold.

With the change in administration Jan. 20 from Democratic President Barack Obama, who appointed Richard Cordray as the first director of the CFPB, to Trump, the Department of Justice has urged the full court to rule against the CFPB. That would clear the way for Trump to dismiss Cordray without fuss. It’s uncertain if the full court will make its decision before Cordray’s term ends in mid-2018.

(Corrected to reflect CFPB has returned $12 billion to consumers.)

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