The 2016 US Presidential race is only weeks away from coming to a close, and—barring an implausible upset by a third party candidate—it’s Hillary Clinton versus Donald Trump.
As any reader with even a passing knowledge of politics is well aware, the Democratic and Republican candidates differ in fundamental ways on nearly every policy issue. But no matter what happens this November, at least one thing is true: whoever wins, big changes are ahead for the Consumer Financial Protection Bureau.
The CFPB, conceived by Democratic Senator Elizabeth Warren and established in 2010 by the Dodd–Frank Wall Street Reform and Consumer Protection Act, has divided the two major parties since its inception. Most Republicans believe the CFPB impedes economic progress, doesn’t adequately protect consumers and holds too much power with too little accountability. Members of Democratic leadership, on the other hand, believe the CFPB has become a vital consumer protection apparatus, and many Democratic lawmakers seek to expand its scope.
While debates over the CFPB rage on in the House and Senate, the agency has been nothing but active in exerting its regulatory muscle over the financial services industry. Just last week, the CFPB fined a financial institution $100 million after discovering that the company had created fraudulent customer accounts. The agency has also made news for proposing a controversial rule intended to reform payday loans.
This regulatory pattern could intensify or abruptly end depending on who’s elected in November. Take a look at what either Presidential candidate has in mind for the CFPB and the financial services industry.
Most Republicans believe the CFPB impedes economic progress, doesn’t adequately protect consumers and holds too much power with too little accountability.
Members of Democratic leadership, on the other hand, believe the CFPB has become a vital consumer protection apparatus, and many Democratic lawmakers seek to expand its scope.
Hillary Clinton’s Stance on the CFPB
Hillary Clinton champions Dodd–Frank and has defended the CFPB in public statements. She has endorsed the payday loan proposal, describing the Bureau as “a government watchdog dedicated solely to protecting working Americans from unfair and deceptive financial practices.”
The CFPB’s authority would almost certainly expand under a Clinton presidency. If elected, Clinton would levy a “risk fee” on banks with $50 billion or more in assets, and impose increased regulations on private equity firms, hedge funds and other non-bank lending entities she refers to as “shadow banks.” Additionally, she has vowed to veto any legislation aimed at diminishing Dodd–Frank’s consumer protections.
Clinton’s Republican opponents, along with critics in her own party, have frequently pointed out the Democratic candidate’s close ties to the finance industry, claiming that she is too sympathetic to big banks—if not outright “controlled” by them. Despite Clinton’s resolute stance on increasing banking regulations, political and industry observers speculate that her presidency would benefit the financial sector, with which she has a decades-long relationship and where she is regarded as the more predictable candidate.
Donald Trump’s Stance on the CFPB
By contrast, Donald Trump intends to diminish the CFPB’s influence and “dismantle” Dodd–Frank entirely. Although the Trump campaign hasn’t been forthcoming with policy details, the Republican candidate has expressed staunch disapproval of the current state of financial industry regulations, commenting that Dodd–Frank has “made it impossible for bankers to function,” and calling it “a very negative force, which has developed a very bad name.”
Trump, a real estate mogul who hasn’t yet held elective office, believes that regulatory systems like Dodd–Frank are overly complicated and that the requirements for compliance with agencies like the CFPB hinder business development overall. If Trump is able to follow through with his pledge to end the CFPB, consumer credit lenders would face far fewer regulations. His policies would also create tax breaks for many members of the financial industry. Despite this, Trump’s right-leaning critics characterize him as “erratic” and “inconsistent,” arguing that his economic philosophy is at odds with conservative, free-market values.
A recent bill passed in the House may provide a glimpse of Trump’s heretofore ambiguous plans to dismantle the CFPB. Introduced by Jeb Hensarling—who met with Trump in June to discuss overhauling financial industry regulations—the legislation would eliminate much of Dodd–Frank and loosen regulations on lenders. It would also put Congress in control of the CFPB’s budget, and place a bipartisan committee (rather than a single director) in charge of the agency.
The Future of the CFPB—and More—Hangs in the Balance
While important on their own, Trump and Clinton’s perspectives on the CFPB and Dodd–Frank are only a small component of either candidate’s policy platforms. A lot will change over the next four years regardless of who’s elected.
Whose side do you support? As professionals impacted by these regulations, it’s our shared responsibility to understand what the Democratic and Republican candidates are proposing and vote in line with our principles. Don’t assume any foregone conclusions. If this race has taught us one lesson, it’s that anything could happen between now and November, and this election is still anyone’s to win.
Whoever steps into the Oval Office next year, we’ll be sure to update this blog with what the 45th President’s tenure has in store for your organization.