President’s budget would cut CFPB funding, limit powers

President Trump revealed his 2019 federal budget plan this week, which features “major savings and reform proposals” across many offices and agencies, including the Consumer Financial Protection Bureau.

President Trump revealed his 2019 federal budget plan this week, which features “major savings and reform proposals” across many executive offices and agencies designed to “bring Federal spending under control and reduce deficits.”

The final page of the budget, found here, recommends drastic changes for the Consumer Financial Protection Bureau. The bureau would have its budget cut substantially and its enforcement powers limited.

“These proposals encompass an aggressive set of actions to redefine the proper role of the Federal Government and curtail those programs that fail to efficiently and effectively deliver promised outcomes to the American people,” claims the report.

The Dodd-Frank Act insulated the CFPB from Congressional control by deriving its funding from the Federal Reserve. The Trump budget undoes that, directing the CFPB to draw all its funding directly from discretionary spending by Congress, like most other federal agencies, starting in 2020. The budget would ramp down to that level by limiting transfers from the Federal Reserve Board during 2019 to $485 million, which is equivalent to the 2015 level and substantially less than the projected 2018 amount of $630 million.

The austerity in fact has already begun at the bureau. Last week, CFPB Acting Director Mick Mulvaney sent a letter to the Federal Reserve requesting $0 in additional funding for the second quarter of 2018. Last October, former director Richard Cordray said he intended to request $217 million for the same period.

In addition to tightening the bureau’s belt, the Trump budget curtails the scope of its enforcement powers. According to the budget report, the CFPB currently “has broad authority to unilaterally develop and enforce regulations irrespective of congressional intent or economic impact.” The budget suggests statutory changes to limit the bureau to “enforcing enacted consumer protection laws” thereby preventing “actions that unduly burden the financial industry and limit consumer choice.” The budget proposes a two-year process that would allow ongoing investigations and litigation to be resolved.

Echoing those sentiments, Mulvaney last week offered a new strategic plan for the CFPB. “If there is one way to summarize the strategic changes occurring at the bureau, it is this: we have committed to fulfill the Bureau’s statutory responsibilities, but go no further,” Mulvaney said in the report. “Pushing the envelope also risks trampling upon the liberties of our citizens.”

Fredrikson & Byron Law