Interest in CFPB Commission Fades Even If Cordray Departs

By Victoria Finkle

Richard Cordray continues to leave Washington guessing about whether he’ll resign from the Consumer Financial Protection Bureau to run for governor of Ohio, but there’s little mystery over whether he’ll be replaced by a single director or multiple commissioners.

Republicans have seemingly abandoned years of effort to restructure the CFPB into a multi-member commission, and Democrats seem to have lost interest in the idea as a bulwark against a single director dismantling the consumer-friendly agency.

“The debate hasn’t moved to sidelines — the debate is over,” Brian Gardner, an analyst for Keefe, Bruyette & Woods, told Bloomberg BNA. “It’s become a big test for Democrats. Across the ideological spectrum, there’s agreement not to touch the CFPB in any way, shape or form.”

The new Congressional consensus in favor of a single director puts lawmakers at odds with the banking industry, which continues to press for a commission.

“Right now it’s still part of the dialogue, perhaps not the everyday dialogue for some, but it remains at the top of the agenda for the industry,” said James Ballentine, executive vice president of congressional relations and political affairs for the American Bankers Association.

Political Calculus

The issue could soon come to a head as Cordray, the agency’s first director, flirts with a possible Ohio gubernatorial run in 2018. He dodged questions about his plans at a Sept. 4 speech at a Cincinnati-area labor union event where he defended the agency’s work.

So far, the threat of a transition hasn’t spurred either party to push seriously for a commission this year, although for different reasons.

Observers say that Republicans have pulled away from the idea in the hopes that they will be able to limit the bureau’s powers in other ways, especially if they win a larger Senate majority in the midterm elections.

A single director appointed by President Donald Trump could find it easier to scale back the agency’s efforts than it would be under a multi-person commission.

Democrats seem content to run out the clock on whomever Trump puts into office, apparently planning to install another more like-minded leader at the agency should GOP control prove short-lived.

“If it seems that members of Congress are coming together in agreement, they’re coming together for very different purposes,” said Brandon Barford, a partner at Beacon Policy Advisors.

Strategic Shift

Rep. Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee, revised his legislation (H.R. 10) overhauling the Dodd-Frank Act earlier this year to keep a single director in place — albeit one with significantly reduced powers — after earlier drafts had called for creating a five-member commission. The bill, known as the Choice Act, passed the House in June.

Industry observers say that the move was part of a broader bargaining strategy, should the chairman later sit down to negotiate with the Senate on changes to Dodd-Frank. Senate Banking Committee leaders are said to be holding bipartisan talks around changes to the law.

“I suspect that the shift was really more of a negotiating tactic as opposed to a change of heart,” said Daniel Crowley, a former Republican congressional aide and partner at K&L Gates who focuses on financial services policy.

The lack of public enthusiasm for a commission doesn’t necessarily reflect lawmakers’ actual preferences, said Crowley. “Deep down there’s broad bipartisan consensus that a bipartisan agency is appropriate,” he said.

Jeff Emerson, a spokesman for the Financial Services Committee, said the revision to the legislation aligns with other changes the Choice Act lays out for the CFPB.

“In light of the bureau’s restructuring as a civil law enforcement agency, it makes sense to have a single director who is removable by the president and accountable for enforcing the laws,” he said in a statement.

A CFPB spokesman declined to comment on political efforts to restructure the agency.

Court Ruling

Edward Mills, a policy analyst at FBR Capital Markets, said the preliminary court decision in the lawsuit between the bureau and mortgage company PHH lends additional reasons for Republicans to hold off.

The U.S. Court of Appeals for the D.C. Circuit agreed to rehear the case en banc earlier this year, after a three-judge panel ruled that the bureau’s structure was unconstitutional, because Dodd-Frank orders that the director can only be removed for cause. While the case is playing out, there’s little incentive for Republican lawmakers to try to move forward with a commission plan.

“The idea that the president can remove the CFPB director at any time and for any reason is, for Republicans, more attractive than dealing with a potentially unwieldy committee structure,” Mills said.

There’s also more risk in changing the agency over to a commission structure given the beleaguered state of the confirmation process in the sharply divided Senate. Republican lawmakers would need at least a handful of Democrats to go along with a commission plan to get it signed into law.

“The nomination and confirmation process in D.C. is completely broken,” Mills said. “Democrats look at that as five shots ongoal to block the agenda of the CFPB — it’s actually a worse outcome.”

Long-Term Planning

Supporters of a commission structure in the banking industry argue it would provide businesses with a greater sense of continuity. They point out that many of the other financial regulators are run by a bipartisan board or commission.

“We’re planning for the next 20 years in the banking industry, not the next two years — we still believe a commission is in the best long-term interest for both consumers and the banking marketplace,” said Richard Hunt, president and chief executive of the Consumer Bankers Association.

Critics of a commission structure argue, however, that the change would hamstring the agency and greatly slow down its policymaking, which they note might also benefit the industry.

Exit Ahead

Cordray’s departure could put the commission issue top of mind once more.

“There’s no question that when Cordray retires or resigns or is terminated, whatever it may be, this is coming back to the forefront,” Hunt said.

But so far, chatter about his possible exit has yet to ignite broader talks, even as the director seeks to finalize the agency’s closely watched rule governing small-dollar loans. Critics, including Hensarling, have asked whether the effort is tied to Cordray’s political ambitions, but the stir hasn’t yet created any sort of groundswell for installing a commission.

The change could ultimately be pursued through the appropriations process or in another must-pass bill if it isn’t taken up as part of a broader Dodd-Frank overhaul.

House appropriators approved numerous changes to the bureau in July as part of fiscal 2018 spending for financial services, but didn’t include a commission proposal. Nearly two dozen trade groups sent a letter to lawmakers in June asking that the language be included in that legislation.

To contact the reporter on this story: Victoria Finkle in Washington

To contact the editor responsible for this story: Seth Stern at

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