Mid-term election results promise to increase the pressure that the Republican party has been putting on the Consumer Financial Protection Bureau. With Republicans controlling the House and Senate as of January 3, 2015, the Dodd-Frank Act itself may be subject to alterations. In addition, Republican state officers continue to challenge the CFPB in court.
Republicans have long complained of a lack of Congressional oversight of the CFPB. Some, like columnist George Will here, have even called for the CFPB’s complete abolition. The Bureau does not rely on Congress for funding. Instead, its funding is derived from a percentage of the Federal Reserve Board’s annual budget and from the penalties that the CFPB extracts. Further, with the very limited duty of the Senate to advise and consent to the appointment of a Director whose term is six years, there is no meaningful method for Congress to influence the CFPB.
The chairmanship of the Senate Banking Committee will be shifting into Republican hands, likely to Richard Shelby of Alabama, a long-time critic of the Dodd-Frank Act. The Republican-controlled Senate will then be able to take up legislation already passed by the House. One example is the Consumer Financial Freedom and Washington Accountability Act, passed by the House in February on a final vote of 232-182, with all House Republicans voting in favor and 10 Democrats breaking ranks. Among the key changes the bill contains are replacing the current CFPB Director position with a five-member bipartisan commission and funding the CFPB’s budget with Congressional appropriations.
On the legal front, oral arguments were heard this week before the D.C. Circuit Court of Appeals in State National Bank of Big Spring v. Jacob Lew, a case brought by 11 Republican state attorneys general. Along with several private plaintiffs, the states are binding together in a direct challenge to the CFPB’s very existence.
The case argues that the bank in question, as well as two D.C. non-profit organizations, are harmed by the CFPB because they incur significant costs as a direct result of new regulation from the CFPB. The attorneys general joined the case arguing that states are subject to CFPB regulation because of their duties as receivers for failed financial institutions in liquidation. A lower court had thrown out the suit, claiming that the states had no standing. The states appealed, claiming they had already lost “valuable” statutory rights as creditors under Dodd-Frank, making their claims ripe for litigation.