The CFPB’s Structure Has Been Ruled Unconstitutional. What’s Next?

Scenario #1: More of the Same in the Near Future

Despite that attention-grabbing word—unconstitutional—some critics of the CFPB argue that the court’s ruling does not sufficiently change the status quo. Besides saving PHH $109 million, the decision does not overturn any of the agency’s other actions and, at least for the time being, Cordray remains in charge.

“Our issue is still with the authority given to a single director,” commented Bill Himpler, executive vice president for the American Financial Services Association, in an interview with NPR’s All Things Considered. “That is, as the court pointed out, not subject to a lot of oversight.”

Himpler and like-minded others agree with the ruling but want further action, believing that the CFPB should fall under the purview of a bipartisan committee. If Democrats and Republicans do not share control of the agency, there isn’t much anyone other than the president can do to challenge or reform it. And if Hillary Clinton, the Democratic nominee, wins the election in November, expect the CFPB to continue on its present course of enforcement.

Scenario #2: A Republican-Controlled CFPB

If, on the other hand, Donald Trump were to become president, we would see a new era of CFPB leadership—or perhaps “non-leadership” would be the more accurate term. Trump ardently opposes government regulations, and has expressed intentions to curb the CFPB and repeal the Dodd–Frank Wall Street Reform and Consumer Protection Act.

Although he would need Congressional approval to dismantle Dodd–Frank entirely, of course, Trump could replace Cordray in the meantime with someone much less interested in pursuing the CFPB’s mission, effectively incapacitating the agency. Nonetheless, that decision would itself be subject to all kinds of political challenges, and the CFPB would likely continue to regulate the financial services industry in at least some respect until Congress passed new legislation.

Scenario #3: A Bipartisan Committee

In the end, it may not matter who becomes the next president. The Financial CHOICE Act of 2016, which recently cleared a House committee, seeks to refashion the CFPB into the “Consumer Financial Opportunity Commission”: a bipartisan agency whose budget is controlled by Congress. AFSA and other members of the consumer credit industry have voiced support for this bill, arguing that a bipartisan committee is the only way to check the Bureau’s authority while ensuring its survival.