A CFPB commission will never fly

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Critics of the Consumer Financial Protection Bureau have long pinned their hopes on converting the Consumer Financial Protection Bureau's leadership structure from a single director to a five-member commission.

But with the recently passed Senate regulatory relief bill excluding such a measure, and that bill's fate resting in the hands of moderate Democrats opposed to changes in the CFPB's structure, such a measure is now dead on arrival.

"We are a long way away from seeing any change in this regard," said Carrie Hunt, executive vice president of government affairs and general counsel for the National Association of Federally-Insured Credit Unions.

The bipartisan regulatory relief package that cleared the Senate last week lacked any changes to the CFPB. Although House Financial Services Committee Chairman Jeb Hensarling, R-Texas, wants to add more than two dozen changes to the Senate bill, moderate Democrats have said CFPB-related additions could kill the whole bill.

During a briefing with reporters before the Senate vote, Sens. Jon Tester, D-Mont., Mark Warner, D-Va., Heidi Heitkamp, D-N.D., and Joe Donnelly, D-Ind., said that if the House makes significant changes from what the Senate approves, the deal will fall apart.

“It may” look completely different after the House adds to the bill, said Tester, who added that “if it does, we are done.”

Warner said that curbing the CFPB’s powers is “absolutely” an example of "a bridge too far."

And yet, House members have not let go of the idea of a CFPB commission.

Last week, Reps. Dennis Ross, R-Fla., and Kyrsten Sinema, D-Ariz., introduced a bill that would change the CFPB's structure to a commission of political appointees and rename it the Financial Product Safety Commission. Reps. Ann Wagner, R-Mo., and David Scott, D-Ga., joined as original co-sponsors of the legislation last year.

But even ardent supporters of the CFPB commission idea are skeptical that a commission has a shot.

Richard Hunt, the president and CEO of the Consumer Bankers Association, who has consistently called for changes in the CFPB structure, said such a change is unlikely in the bill sponsored by Senate Banking Committee Chairman Mike Crapo, R-Idaho.

"I do not expect it in the Crapo bill because I think moderate Democrats got pressure back from the progressive wing of the Democratic party," Hunt said.

House Republicans and Hensarling in particular have spent the past nine years, since even before the CFPB was created, calling for the agency to be restructured. A CFPB commission was just the start of proposed reforms, with other GOP-supported measures including subjecting the CFPB to the congressional appropriations process or curbing the bureau's regulatory authority.

But the drumbeat among House Republicans for a CFPB commission has lost steam with the election of a Republican president. While the GOP wanted to check the power of a Democrat-appointed CFPB director, now that President Trump gets to choose the agency's leader, the GOP has no intention of giving up any power.

Some have even suggested they will support a commission at the end of the next permanent director's five-year term.

"A [CFPB] commission is still on the free-market agenda, but it's temporarily on the back burner to allow a new Republican director to leave his stamp on the agency," said J.W. Verret, a banking law professor at George Mason University's Antonin Scalia Law School and former senior counsel at the House Financial Services Committee under Hensarling.

President Trump is expected to name a permanent director soon to replace acting CFPB Director Mick Mulvaney, who also heads the Office of Management and Budget. A Senate-confirmed CFPB director serves a five-year term.

Even Mulvaney, who has supported the idea of a CFPB commission, has not been shy about exercising his power as the agency's sole leader.

“There is a viable public policy argument for a CFPB commission, but the GOP has no interest in curtailing the director’s authority now that they have the pick, and Democrats are hesitant to touch the CFPB in any way at all,” said Isaac Boltansky, director of policy research at Compass Point Research & Trading.

Democrats are taking their chances with a single director.

"There's no question that for some of the Democrats, this was their limit," said Ed Mierzwinski, senior director of federal consumer programs at U.S. PIRG. "Our position was asked and answered back in 2010 and Congress chose to go with a single director because we wanted an agency with a director who could stand up to the powers of Wall Street."

"Eventually we anticipate having a good director in there," Mierzwinski said, adding, "Most commissions are failures and can be manipulated by the industries they regulate."

Republicans are expected to add a rider to the omnibus spending bill that would subject the CFPB to the appropriations process. Currently, the CFPB is funded through the Federal Reserve.

Bankers have lamented that the politicization of the agency has meant the pendulum swings too far back-and-forth between tough regulations, on the one hand, and deregulation, on the other.

"It is stunning to watch the politicians not focus on what is good for the industry, which they are supposed to be regulating," said Craig Nazzaro, of counsel at Nelson Mullins in Atlanta. "Until you get the politicians to focus on the banking industry and what's best for the industry and consumers, and not the political parties, you're going to have inconsistent regulation that is going to burden and stress the financial markets."

Nazzaro said that the industry is "clamoring for guidance" and that it wants consistent rules of the road.

He questioned the logic of financial firms spending years building internal controls only to have regulators walk them back.

"If you see your competitors deleveraging compliance controls and gaining market share, are you going to have to match that?" he said.

Carrie Hunt, of NAFCU, said a commission would allow for robust discussion "from both sides of the aisle," but thinks any change to the CFPB will take more time.

"We are certainly realistic that this change is not going to happen over night," she said.

Ryan Donovan, chief advocacy officer at the Credit Union National Association, said a commission was not part of the discussion of reg relief.

"I think we've got a pretty good bill," he said. "Clearly the commission bill wasn't part of that."

Richard Hunt, the head of the CBA, said he is still hopeful that Congress will act to change the CFPB's single-director structure to a commission before the end of the year.

"Chairman Hensarling, who has voted for a commission on at least five occasions, should be calling for the passage of a commission as well," Hunt said.

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