On February 3, 2017, President Trump signed an Executive Order on “Core Principles for Regulating the United States Financial System.” This is what the Order might mean for the Consumer Financial Protection Bureau (CFPB).
First, notably the Order does not curtail any specific CFPB regulation, nor does it even mention the Dodd-Frank Act. Instead, it merely requires that those agencies that are on the Financial Stability Oversight Council (FSOC) must report – within 120 days of the Order (and periodically thereafter) – regarding the regulations that are causing problems for business growth or are otherwise inconsistent with Trump’s Core Principles. Of course, the member agencies include the CFPB. (Other member agencies of the FSOC are: the Federal Reserve, CFTC, FDIC, FHFA, NCUA, OCC, SEC, and the Treasury Department.) Whoever the Director of the CFPB is by the 120-day deadline will be the person in control of determining what should be presented in the CFPB’s report to President Trump. It will be up to the heads of the member agencies to identify needs for financial reform and draft reports that identify areas of focus for the new administration.
Second, the first principle aligns with the CFPB mission. The Order states:
It shall be the policy of my Administration to regulate the United States financial system in a manner consistent with the following principles of regulation…. (a) empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth.
Such principles of consumer empowerment and informed decision-making by American consumers overlap with the policy objectives and programs of the CFPB, including campaigns to ensure that borrowers “Know Before You Owe” when it comes to mortgages and credit cards, and the CFPB’s efforts to aid in the unique challenges facing retirees, military members, and others pursuant to the mission of CFPB’s Office of Financial Protection for Older Americans and its Office of Service Member Affairs, see 12 U.S.C. § 5493(e and g).
Third, of the six principles, some clearly have nothing to do with the CFPB. For example, one principle focuses on competition with foreign firms and another focuses on promoting American interests in international financial regulatory meetings. Since the CFPB’s primary focus is depository or non-depository institutions in the domestic sphere, principles governing negotiations with foreign powers or overseas corporations will have little effect on the CFPB.
Fourth, the Order also identifies another principle of regulation: “restore public accountability within Federal financial regulatory agencies and rationalize the Federal financial regulatory framework.” Because the authority to monitor for and enforce consumer financial protection authorities is still dispersed across multiple bank prudential agencies, the Federal Trade Commission (which is not part of FSOC), and the CFPB, the need for greater consistency across and reduced duplication between agencies may be a theme that gets traction as agencies work to respond to this principle.
Fifth, the Order specifically states that “Nothing in this order shall be construed to impair or otherwise affect: (i) the authority granted by law to an executive department or agency, or the head thereof.” As such, it does nothing to alter the structure of the CFPB as legislators’ proposals do, and does not in and of itself change the authority granted by the Dodd-Frank Act to the CFPB. The PHH Corp. decision, involving a 3-judge panel decision declaring the CFPB’s structure to be unconstitutional, is still pending as the CFPB has sought an en banc review, and the Order does not speak to the constitutional authority of the CFPB, leaving the issue to be fought in the courts.
Sixth, although the Order does not directly address CFPB regulations or processes, it establishes a path through which others could. The Order sets up a protocol for a submission to the President in 120 days a report to address government policies or laws inhibiting the American regulatory system’s ability to act in a manner consistent with the Core Principles. The Order serves to establish a new procedure that did not exist before, which legislators and other stakeholders who are interested in the CFPB may use to channel information to the President to justify curtailment of CFPB regulations such as various rules on arbitration, payday lending, debt collection, or prepaid card products. But exactly how and whether this path will be used to undermine pending regulations will depend on the manner in which the staff at the affected agencies prepares these reports. The devil will be in the details of those reports, and stakeholders’ ability to meet with CFPB staff and influence the reports’ content. The identity of the Director when these reports come due will certainly drive the policy priorities that the CFPB will convey to the administration in the next 120 days.
Overall, it appears that the Executive Order lays the groundwork for a mechanism to effectuate future substantive curtailment as well as opportunities to shift the emphasis in the CFPB’s work, such as focusing on a perhaps greater budget for the consumer empowerment and engagement functions relative to the rulemaking function of the CFPB.
