House Financial Services Committee Chair Jeb Hensarling (R-Texas) unveiled the outline of a massive new Republican plan this week to overhaul or strip away nearly every aspect of the Dodd-Frank financial reform. The new plan, called the Financial CHOICE Act, would result in big changes to the Dodd-Frank, including a repeal of the Volcker Rule, the creation of new capital and liquidity standards for banks and, most relevant to the collections industry, a thorough strip-down and rebuild of the CFPB.
“Simply put, Dodd-Frank has failed,” Mr. Hensarling said, as quoted by several national newspapers. “It’s time for a new legislative paradigm in banking and capital markets.”
The proposed plan would significantly curb the Bureau’s independence by introducing checks and balances more common in other government regulatory bodies. Under the plan, the CFPB would not only get a new name – the Consumer Financial Opportunity Commission (CFOC) – but it would also get a new governance structure. The directorship model (and, presumably, the Bureau’s sitting Director) would be out. In its place the Bureau would have a five member, bipartisan commission that would have to operate under congressional oversight. The revamped Bureau would also have to contend with Inspector General oversight and would have to request permission from Congress before collecting information on the finances of consumers.
The new plan would also repeal the Bureau’s ability to ban bank products or services it deems “abusive,” and eliminate its indirect auto lending guidance.
Aspects of the plan have already drawn support from industry advocacy groups. The ACA has expressed support for the Republican plan to replacing the CFPB director with a bi-partisan commission.
The insideARM Perspective
The Act has almost no chance of passing any time soon, certainly not with a Democrat in the Whitehouse. In fact, President Obama wasted no time in criticizing the plan.
“Have we really forgotten what just happened eight years ago? It hasn’t been that long ago,” Mr. Obama said, as quoted in the New York Times. “And because of their reckless behavior, you got hurt. And the notion that you would vote for anybody who would now allow them to go back to doing the same stuff that almost broke our economy’s back makes no sense.”
What Hensarling’s plan aspires to do, however, is put financial regulatory reform , the merits of Dodd-Frank and even an assessment of CFPB powers squarely in the middle of the presidential debate this fall. For industry parties interested in CFPB reform, the best bet is a long game, and this isn’t a bad start.