Bills
| 3.23.22

Should the Consumer Financial Protection Bureau Be Eliminated? (S. 1335)

Do you support or oppose this bill?

What is S. 1335?

(Updated December 28, 2019)

This bill — the Repeal CFPB Act — would repeal the Consumer Financial Protection Act of 2010, thereby eliminating the Consumer Financial Protection Bureau (CFPB).

Argument in favor

The CFPB imposes burdensome regulations that harm small businesses, consumers and the financial services industry overall. This stunts economic growth to the whole country’s detriment. Eliminating this agency would help boost the economy and reduce barriers to growth.

Argument opposed

The CFPB works to protect American consumers from predatory practices by the financial services industry and others. Eliminating this agency would be an administrative nightmare and a return to the pre-financial crisis days of poorly regulated banks taking advantage of consumers.

Impact

Consumers; financial services industry; financial regulation; and the CFPB.

Cost of S. 1335

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sen. Ted Cruz (R-TX) reintroduced this bill from the 115th Congress to eliminate the Bureau of Consumer Financial Protection (CFPB): 

“There has never been a greater farce and waste of government resources than the Consumer Financial Protection Bureau, and now is the time to eliminate it. Make no mistake, it does little to protect consumers and was created during the Obama administration to enforce burdensome regulations which have stunted economic growth and negatively impacted small businesses and consumers. I am proud to reintroduce this legislation alongside Senators Lee, Inhofe, Sasse, Rounds, and Blackburn, and urge our colleagues to take this up for a vote in the Senate as soon as possible.”

In a 2017 statement, Sen. Cruz argued that eliminating the CFPB would take a “critical step in the right direction” toward eliminating the “harmful regulatory impositions of Dodd-Frank.” He also said that eliminating the CBPF would “free consumers and small businesses from the CFPB’s regulatory blockades and financial activism, which stunt economic growth.”

Original cosponsor Sen. Jim Inhofe (R-OK) adds that the CFPB is a relic of the Obama administration: 

“Obama’s administration was all about expanding the size and scope of federal bureaucracy. For almost eight years, the CFPB has held far too much power with virtually no Congressional oversight. I’ve seen how Oklahoma banks are being forced to spend more and more of their time and resources on complying with federal government mandates, and less on their customers—driving up costs for families, small businesses, farmers and ranchers. Eliminating the CFPB is the next step in cutting bureaucratic red-tape for hard-working Americans.”

Some industry groups have also opposed the CFPB from its inception, arguing that it’s too powerful and needs reform.

Opponents of eliminating the CFPB argue that the bureau has helped American consumers by saving billions for middle-class Americans through investigations of consumer complaints and getting refunds when it determines that a financial institution misled its clients. They contend that undermining or eliminating the agency would embolden the financial institutions which were responsible for the 2008-09 financial crisis. In a February 2018 Washington Post op-ed, former CFPB Director Richard Cordray wrote: 

“Over the past few weeks, the administration has dismissed enforcement actions, delayed the payday lending rule and halted the investigation of Equifax. Calling for the CFPB to act with more ‘humility,’ [CFPB’s then-director Mick] Mulvaney has taken up the cause of financial industry cheaters who have done — and continue to do — great harm to the American people… This behavior toward the CFPB — and agencies across Washington — has starkly exposed the falsity of candidate Trump’s grandiose campaign promises about taking on the corrupt interests that prey on working Americans and their families.”

In 2017, U.S. PIRG consumer program director Ed Mierzwinski said: 

“The CFPB is designed to be the only agency that protects consumers no matter where they do their financial business. Their powers extend to debt collectors, credit bureaus and payday lenders. It’s designed to create fair rules of the road; 29 million consumers have been the beneficiaries of $12 billion in refunds or other relief from the CFPB.” 

Mierzwinski also called Sen. Cruz and Rep. John Ratcliffe (R-TX), who sponsored the House version of this bill in the 115th Congress, “a couple of back-benchers.” With this in mind, he added, “it’s doubtful their legislation moves to the front of the line. This is a message bill from pretty extreme people, so it shows they don’t care about governing.”

This bill has seven Republican Senate cosponsors in the 116th Congress. Last Congress, it also had seven Republican Senate cosponsors and didn’t receive a committee vote. With Democrats controlling the House, it’s unlikely that this bill will pass in the current Congress. In a 2017 Wall Street Journal op-ed, then-House Financial Services Committee Chairman Jeb Hensarling (R-TX) said it wouldn’t be possible to overcome a Democratic filibuster to abolish the CFPB; instead, he called for the agency’s functional termination through budgetary maneuvers.


Of Note: This is Republicans’ third attempt to eliminate the CFPB in the last few years. Sen. Cruz has led the effort all three times: his first attempt was in 2015, when he introduced a bill that would have eliminated the CFPB, which he termed a “runaway agency” at the time. His second attempt was in 2017. 

The CFPB was established as a new government agency under Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act. It was the brainchild of now-Massachusetts Senator and 2020 Democratic presidential candidate Elizabeth Warren, who had yet to be elected to the Senate at that point and was then teaching at the Harvard School of Law. That financial reform bill, which was passed in the aftermath of the 2008-09 financial crash, was enacted by congressional Democrats and near-universally opposed by congressional Republicans: only three Senate Republicans and three House Republicans voted in favor of Dodd-Frank. Upon its establishment, the CFPB was made an independent agency charged with reining in deceptive and anti-consumer practices in a range of financial products and services. 

In 2017, the CFPB was the subject of a federal appeals court ruling that declared its unusual leadership structure — in which its sole Director is appointed by the President and can only be removed from office if the administration demonstrates that the Director has done something warranting dismissal (rather than being fireable at the President’s discretion, as is the case in most other agencies with a sole director-level administrator) — unconstitutional. In the wake of that ruling, a number of consumer advocacy groups, state attorneys general and two Congresspeople (Sen. Sherrod Brown (D-OH) and Rep. Maxine Waters (D-CA), then the ranking members of the Senate Banking Committee and House Financial Services Committee) stepped forward to asking for permission to intervene in the CFPB’s defense. 

At that time, U.S. PIRG Consumer Program Director Ed Mierzswinski defended the CFPB and then-Director Richard Cordray: 

“Since 2011, the CFPB has restored order to the financial marketplace, and consumers overwhelmingly support its efforts to rein in abusive practices. Director Richard Cordray has brought much-needed transparency to industries that sorely lacked it, including remittance transfers, credit cards, student loan servicing and payday loans. Interfering with that progress or efforts to roll back important consumer protection provisions will only put our economy and middle class at risk to another financial crisis.”

As of July 2019, both the Ninth Circuit and the D.C. Circuit court had ruled that its structure is constitutional. However, Seila Law has filed a petition for a writ of certiorari with the Supreme Court seeking review of the Ninth Circuit’s ruling.

In 2017, Ballard Spahr LLP attorneys Daniel Delnero and Jeremy Sairsingh noted that eliminating the CFPB would be an “administrative nightmare”: 

“[A]ctual implementation [of a CFPB elimination] would be an administrative nightmare. All of the rules and regulations passed by the CFPB would have to be unwound, which would require courts, compliance attorneys, and industry to determine what the current state of the law would be had the CFPB never existed. Additionally, the CFPB has entered into dozens of consent orders, almost all of which contain prescriptive injunctive relief. Some of these consent orders were entered into directly with the CFPB, but others were entered by federal courts. Presumably, parties who entered into administrative consent orders with the CFPB would be relieved of their future obligations under them. But the impact on consent orders entered by a federal court is less certain. Those orders are final judgments of an Article III court, and violations thereof are subject to the court’s authority to enforce its orders and judgments. The injunctive provisions of such orders would arguably remain in place, although there might not be another agency or individual with standing to bring a motion to enforce them.”


Media:

Summary by Lorelei Yang

(Photo Credit: Stephen D. Melkisethian via Flickr / Creative Commons)