The Supreme Court’s ruling this week invalidating the leadership structure at the Consumer Financial Protection Bureau could put credit unions in the driver’s seat when it comes to helping shape the future of the agency.
It could also mean very little.
“I don’t think [the decision] means a lot right now,” said Michael Christians, an Iowa-based credit union compliance consultant, noting that the court’s decision was only about leadership and doesn’t impact the bureau’s operations or mission. “As far as what the CFPB is and does, it’s kind of business as usual.”
The industry has had a rocky relationship with the bureau, particularly in its early days, but things have gone more smoothly since President Trump appointed Kathy Kraninger to lead the bureau and she adopted a less aggressive stance than her predecessor, Richard Cordray.
The decision doesn’t mean credit unions should get comfortable with the status quo, Christians and others said. The court has essentially given its OK for the next administration to put its own director in place, which some said could effectively politicize the agency.
“A new director still has broad powers, and somebody coming back in every four or eight or 12 years and rewriting the regulations presents challenges in terms of compliance,” noted Bill Cheney, CEO of SchoolsFirst Credit Union in California, who was CEO at the Credit Union National Association when the CFPB first began operations. “You lose some of that continuity of power and leadership if the president can just make a change whenever she or he feels it’s appropriate to do that.”
Multiple industry groups have long lobbied for the bureau’s leadership to be converted to a bipartisan commission. Two bills recently introduced into the
Bills of that nature have been introduced before and gone nowhere, however, and it remains to be seen if things will be different this time. The court ruling could add momentum to that push, observers said, but that legislation could also easily be overshadowed by the pandemic, recession and upcoming election.
Some Democrats may also be inclined to wait things out in the hopes that former Vice President Joe Biden wins the presidency in November and appoints a new director more closely aligned with their philosophies.
“If the Republicans are worried about [the election] going the Democrats’ way, they could work on pushing it,” said Jeremy Smith, director of client partnerships at PolicyWorks. “And vice versa – maybe now that Democrats see this, they don’t push it.”
If November results in a “blue wave” and Democrats take the White House, hold the House and retake the Senate, there could be a renewed interest in pushing consumer-protection policies. That might increase the chances of a commission bill advancing. But the pandemic response could also overshadow those concerns.
“Even on the Democratic side I don’t know that there’s a ton of folks up in arms in regards to the consumer-protection piece,” added Smith. “I’ve seen a lot of comments made by different folks in Congress but I don’t know that we’re at the level where we were in 2008.”
Several analysts suggested that if Biden wins the White House, it could put Sen. Elizabeth Warren – who helped create the agency – into a particularly strong position to advocate for reforming the bureau, either in her current role as a senator or as a potential vice president.
“She’s going to have a lot to say about what happens with the CFPB because it was her original vision … so if there is a blue wave I think the CFPB will get more attention,” said Cheney, adding that a Democratic administration and Congress might also “look for other ways to help improve the independence of that agency given that the Supreme Court has ruled against the original structure.”
What’s next?
The Supreme Court ruling didn’t vacate the Dodd-Frank Act that created the bureau or mandate any specific changes, so it’s unclear how soon any shifts at the agency might take place. And if a commission bill doesn’t gain traction in Congress, the status quo could be here for a while.
Ironically, the National Credit Union Administration could see a shift on consumer protections before any sea change at the CFPB. Todd Harper, NCUA board member, has put a focus on consumer protections and lost a push last year to implement more of those measures at credit unions.
Board Member Mark McWatters’ term has expired, however, and it’s unclear if his replacement will be confirmed before the next presidential inauguration. If Biden wins the election, that could put him in the position to name the next NCUA board member – one who might share Harper’s views on the topic.
“I would argue that NCUA could probably do additional things from a consumer-protection perspective, but I would not say NCUA is lacking in that perspective – they’re just going about the conversation in a different way,” said Christians.
PolicyWorks’ Smith concurred that changes could take place at NCUA before the CFPB, “but I don’t know how substantial those would be.”
Until some concrete action takes place, it’s likely that credit union advocates will continue to push back against the bureau. By placing the power to fire a director into the hands of the president, the court’s decision “goes 180 degrees in an opposite direction of what proponents of the CFPB sought when they created the position in 2009,” said Ryan Donovan, CUNA’s chief advocacy officer.
There’s also the possibility of further litigation related to past rulemaking at the bureau, including the court’s question of ratification, in which new leadership revisits previous decisions under prior directors.
“[T]here will be discussion on whether or not certain things that the CFPB has done in the past are legal or not, and that can lead us down a road to additional litigation,” said Carrie Hunt, EVP and general counsel at the National Association of Federally-Insured Credit Unions.
While some suggested credit unions’ best path forward is to continue to push for the establishment of a commission, Christians said a better use of the industry’s time is to try to increase its impact on the bureau’s rulemaking.
“My first and foremost recommendation to individual credit unions, especially in the present environment, is to get involved in the notice-and-comment process,” he said. “If you have better ideas, share them. If you have operational concerns, share them. Those are the more important messages to be sent, in my opinion, versus this conversation about should it be an independent director versus a commission.
“Let’s have a real conversation about how the $175 million[-asset] credit union is drowning under all these new requirements and what can be done to assist them with trying to be successful in this new consumer-protection environment,” Christians added.
