Democrats aim to roll back 'anti-consumer' measures at nation's watchdog agency

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A bill that would reverse some controversial moves made at the nation’s consumer watchdog could get a floor vote in the House in May, according to a letter that Democratic lawmakers received from their leadership late last week.

The Consumers First Act, which was approved 34-26 by the House Financial Services Committee in late March, would require the Consumer Financial Protection Bureau to “promptly reverse all anti-consumer actions” made under its previous acting director, Mick Mulvaney, who is now President Trump’s acting chief of staff. The letter from Majority Leader Steny Hoyer, D-Maryland, said the measure is one of many that the House may vote on next month.

Among other provisions, the legislation would require the bureau’s consumer complaint database to remain public, eliminate the director’s ability to limit the legal reach of its fair lending office and establish an Office of Students and Young Consumers to focus on financial education in that population.

Kathy Kraninger, director of the Consumer Financial Protection Bureau (CFPB) nominee for U.S. President Donald Trump, speaks during a Senate Banking Committee confirmation hearing in Washington, D.C., July 19, 2018. 

Andrew Harrer | Bloomberg | Getty Images

While the bill — sponsored by Financial Services Committee Chairwoman Maxine Waters, D-California — might get approved in the Democratic-controlled House, it would likely face an uphill battle in the Republican-dominated Senate.

“I don’t see this going anywhere,” said Alan Kaplinsky, a partner at the national law firm Ballard Spahr and an expert on the CFPB. “I think it’s just an opportunity for Democrats to vent about their unhappiness over Mulvaney having been acting director.”

Now under the direction of Trump appointee Kathy Kraninger, who replaced Mulvaney in December, the CFPB has been a point of political contention since its creation was legislated by the Dodd-Frank Act of 2010.

After the bureau’s formation, Republicans and the financial services industry decried what they considered overzealous regulatory overreach by its Obama-appointed director, Richard Cordray. Then Democratic lawmakers and consumer advocates cried foul when Mulvaney, who was named by Trump to replace Cordray in late 2017, pulled back enforcement and began reviewing existing policies and pending regulations.

Kraninger recently indicated that the bureau is still exploring whether its public consumer complaint database should be private, along with reviewing how it measures whether a company is using discriminatory lending practices, according to published reports. Among other controversial moves, the agency also is still reviewing the so-called payday lending rule, which would require lenders to confirm the borrower’s ability to repay the debt.

The CFPB did not respond to an inquiry from CNBC.

Meanwhile, three cases in different federal circuit courts challenge the constitutionality of the bureau, at least partly on the grounds that its single-director structure puts too much power in the hands of the president.

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“One or more of the cases likely will end up in the Supreme Court, probably within the next year,” Kaplinsky said.

If the bureau were ruled unconstitutional by the high court, the question would be how to fix that defect, Kaplinsky said.

One solution that would help remove the politicization of the bureau would be to replace a solo director with a five-member commission, he said. It’s an idea that’s been bandied about but has yet to take hold with lawmakers.

“The FCC [Federal Communications Commission] has a five-member commission,” Kaplinsky said. “Republicans have three of the spots and Democrats have two.

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“They manage to function very well,” he added. “You don’t have the extremes that we’ve seen with the CFPB — the swinging back and forth, depending on who’s in control.”

Consumer advocates, meanwhile, remain hopeful that the Consumers First Act could get some traction in the Senate.

“Senate banking committee members from both parties are working together on data privacy,” said Mike Litt, consumer campaign director for consumer advocacy group U.S. PIRG. “Perhaps the Consumers First Act can be taken up by them, too.”

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