If The CFPB Falters, Here’s Who Will Take Their Place

If The CFPB Falters, Here’s Who Will Take Their Place

The Consumer Financial Protection Bureau probably isn’t going away, but it may be changing. As I wrote last week, the United States House of Representatives recently passed H.R. 10, the Financial CHOICE Act, which aims to curb the CFPB’s authority by altering the Bureau’s funding structure, giving the President the power to remove CFPB directors at will, and several other measures.

Some critics of the CFPB and the Dodd–Frank Wall Street Reform and Consumer Protection Act hope these potential changes will decrease the regulatory burden on consumer finance companies. Others are casting their hopes even higher. Notice that I wrote the Bureau “probably isn’t going away”—there’s a minor chance that it may, in fact, dissolve. Anything is possible with a Republican majority in the House, Senate, and Executive branch.

But no matter what happens, Fair Lending regulations are another story. In the CFPB’s possible absence, other regulatory bodies at the state and federal levels are poised to step in and continue enforcing more or less the same doctrine we’ve grown accustomed to over the last few years:

The Department of Justice

Lending oversight didn’t start with the CFPB. For decades before the financial crisis of 2007–2008, the United States Department of Justice oversaw the consumer lending market, and its regulatory approach created the template for the agency we all know and love (or not) today. For instance, one can trace the CFPB’s attitude toward disparate impact back to DOJ investigations and court cases in the 1970s, 80s, and 90s.

Were the CFPB to go away, the DOJ may once again intensify its focus on lenders. Even if Attorney General Jeff Sessions doesn’t particularly about Fair Lending issues, we can expect Democrats to exert political pressure on the DOJ to bring consumer protection actions in the absence of the CFPB.

The Federal Trade Commission

During one of our recent webinars, an attendee posed a question to presenters Kynzie Sims and Michael Benoit about the nature of the CFPB in relation to other federal bodies: “How much does [the Federal Trade Commission’s jurisdiction overlap with the CFPB, and do you anticipate the FTC modifying their Fair Lending enforcement stance?”

Here’s what Michael had to say:

“The short answer is that the FTC enjoys concurrent jurisdiction with the CFPB on pretty much everything the CFPB has jurisdiction over. They have a memorandum of understanding between them as to who gets to go first, what the rules are. If one wants to bring a case, then there’s got to be discussion between the two parties. … The CFPB’s jurisdiction is limited to financial services, generally. The FTC’s jurisdiction is very, very broad. They cover trade, commerce, and the whole.”

Think of regulatory bodies like the armed forces: if the FTC is the US Army, the CFPB is a specialized division of the Army (think airborne or armored divisions). We’re talking about government deciding to shut down a certain operational channel, and not Fair Lending laws as a whole.

State Authorities

Depending on where your business operates, the question of the CFPB’s future may be moot. A number of states have laws in place that are similar to (if not more onerous than) Dodd–Frank, and lenders may be much more likely to interact with state agencies than federal authorities. Here’s Michael again:

“If you look at the states that have been historically active in enforcement, and the states that have been historically very focused on consumer protection—and you think about states like New York, and you think about California, and you think about Illinois—states with big populations, generally with Democrat administrations, but generally with [big] populations, there’s a real focus for that population on consumer protection.”

Regulators Aren’t the Only Ones Watching Your Business

Perhaps more important than any one regulatory body are the demands of your customers and capital partner. We’ve said it before, we’ll say it again: compliance is good business. Compliance keeps you in business. Smart consumer finance companies harness the CFPB’s guidance to protect their reputations and reduce risk for their stakeholders.

In summary: Don’t assume that you’ll have fewer compliance obligations anytime soon. Your organization needs to follow the law regardless of who’s enforcing it.

Can your compliance management system stand up to CFPB, DOJ, FTC, bank, and consumer scrutiny? Find out in our free, on-demand “Fair Lending in the Trump Era” webinar.

Toby Graham

Toby manages the marketing communications team here at Compli. She's on a quest to help people tell clear, fun stories that their audience can relate to. She's a HUGE sugar junkie...and usually starts wandering the halls looking for cookies around 3pm daily.

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