Consumer watchdog is a Trump target ... eventually

Republicans are eager to replace the head of the Consumer Financial Protection Bureau. But Trump has higher economic priorities, and Democrats are poised to fight for its current head, Richard Cordray.

Steve Helber/AP/File
Consumer Financial Protection Bureau Director Richard Cordray, center, listens to comments during a panel discussion in Richmond, Va., in 2015. Republicans are eager to replace him with someone more friendly to banks.

As president, Donald Trump will have the authority to appoint some 4,000 federal employees. Many jobs automatically turn over, creating vacancies to fill with allies and associates.

But one post is supposed to be immune from such political pressures: the head of the Consumer Financial Protection Bureau, the watchdog set up after the 2008 crash to check the finance industry’s abuses. Under the 2009 Dodd-Frank Act, the CFPB’s director can only be removed for cause, such as negligence or fraud.

A federal court ruling last October said this degree of power was unconstitutional, however, opening the door for the president to dismiss the director at will.

And Republicans in Congress are eager to replace the current head, Richard Cordray, a Democrat, with an ally. The chief contender is former Rep. Randy Neugebauer (R) of Texas, an outspoken critic of the CFPB who has previously proposed legislation to rein in the agency and reform its governance.

Mr. Trump has yet to show his hand on the tussle over the CFPB. Having campaigned as a defender of the working man against predatory capitalists, he may find it hard to justify swiping at a regulator that has made its name by recouping billions of dollars in fines from mortgage brokers, auto lenders, and debt collectors who cheated consumers.And Trump has prioritized several other economic issues, such as trade policy and corporate taxation, that may push the CFPB down the list even if his sympathies are with the bureau's critics, several lawyers for financial clients told Bloomberg-BNA.

Critics of the CFPB say it is stifling choices for consumers and is biased against financial service companies. The bureau recently investigated Wells Fargo over its creation of thousands of fake bank accounts to hit internal targets.

Last year, it also issued a new set of rules for the payday lending industry, provoking a strong reaction from the industry and its legislative allies. Mr. Neugebauer, who has received campaign contributions from payday lenders, was among those in Congress who pushed back against the rules that would restrict lending terms and impose underwriting standards.

On the campaign trail, Trump complained that the Dodd-Frank Act, which levied tougher rules on banks, was holding back the economy. But few specifics have emerged, and banking analysts have said that most lenders have already adjusted to the new rules and wouldn’t necessarily want to see a complete overhaul. For payday lenders, the stakes are higher since the CFPB’s proposed rulebook hasn’t been implemented yet.

Democrats on the House Financial Services Committee have vowed to defend Mr. Cordray and oppose “costly, meritless litigation” in order to force him from office.

The CFPB is seeking a full court review of the District of Columbia Circuit’s ruling. It notes that Cordray’s current term ends in July 2018. However, Republican Sen. Mike Crapo, chairman of the Senate Banking Committee, told Bloomberg-BNA that Cordray should resign so that Trump could name a successor.

Republican lawmakers have proposed changing its leadership from a powerful directorship to a bipartisan commission, similar to the Securities and Exchange Commission or Federal Trade Commission. That would likely blunt its investigative zeal and its independence from congressional critics, to the dismay of reformers.

Sen. Elizabeth Warren (D) of Massachusetts, a key supporter of the watchdog’s creation, has vowed to resist any changes to the CFPB. “It’s time to send a message to big banks, payday loan lobbyists, and their Republican friends in Congress: the American people are watching,” she told an activist group last week.

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