The Republican Congress is pushing big changes to Dodd-Frank and the Consumer
Financial Protection Bureau (“CFPB”), with the most important
reform being to give the President the ability to appoint and fire the
CFPB Director at will.
The Financial CHOICE Act, deemed by some as the Republican replacement
bill for the Dodd-Frank Wall Street Reform and Consumer Protection Act
(“Dodd-Frank”), also looks to drastically overhaul the processes
regulating financial institutions. According to House Financial Services
Committee Chairman Jeb Hensarling (R-TX), this updated version offers
a better opportunity for economic growth, while still providing sensible
With the updated version of the Financial CHOICE Act 2017 (“CHOICE
Act 2.0”), Republicans are eager to work with the president to overhaul
Dodd-Frank, changing the structure of the CFPB, and reforming what they
see as overly burdensome financial regulations restricting choice in the
CHOICE Act 1.0
The impetus for repealing Dodd-Frank started in the summer of 2016, when
Hensarling announced a plan to replace Dodd-Frank with a “pro-growth,
pro-consumer” option. The replacement bill was entitled the Financial
CHOICE Act, with the acronym standing for Creating Hope and Opportunity
for Investors, Consumers, and Entrepreneurs.
When describing CHOICE 1.0, Hensarling stated that its reforms would untangle
the rules Dodd-Frank enacted, in addition to reforming the regulatory
environment for the financial sector. The goal of the CHOICE Act is to
“end taxpayer-funded bailouts of large financial institutions; relieve
banks that elect to be strongly capitalized from ‘growth-strangling
regulation’ that slows the economy and harms consumers, and impose
tougher penalties on those who commit fraud as well as greater accountability
on Washington regulators.”
The End of Dodd-Frank?
On April 19, 2017, Hensarling released the legislative text of the discussion
draft that will lead to reform of the Dodd-Frank law. Due to its myriad
of regulations and the fact that 75% of them have already been initiated,
outright repeal of the Dodd-Frank Act would be precarious. Republicans
seek to rather alter much of the existing law in response to what they
consider is an obstacle to economic growth and business development.
CHOICE ACT 2.0
Under this new revision, the CFPB will be changed to the Consumer Financial
Opportunity Agency (“CFOA”), an executive agency with a presidential
appointed Director and Deputy Director.
The bill will make the following changes in implementing the CFOA:
Leadership - The sole director’s and the deputy director’s 5-year staggered
terms are eliminated. Those positions are now removable by the President at will
Structure – The EOC reports directly to the Director, and all mandatory advisory
boards created under CHOICE 1.0 are now optional and at the director’s
Authorities - The CFOA will be an enforcement agency only without any supervisory
functions. The consumer complaint database can no longer be published
and market monitoring is now eliminated
The Bottom Line
After nearly 100 days in office, President Trump continues to unwind much
of the Obama Administration’s legislative legacy. After failing
to pass an Obamacare replacement bill, and now scrambling to find Republicans
willing to come on board, the administration is turning its sights to
tax cuts and regulatory reform.
The CHOICE Act 2.0 is the most aggressive legislative bill presented yet
by the Trump-era Congress. With the revamped version, Hensarling, while
conceding it would be difficult to kill Dodd-Frank, has provided the framework
that would eliminate much of the law's regulations.
According to Sarah Rozier who is the Financial Services Committee director
of communications, the CHOICE 2.0 plan, “…protects consumers
by holding Wall Street and Washington accountable, ends bailouts and unleashes
America's economic potential."
The new discussion draft has far-reaching consequences for other parts
of Dodd-Frank as well, attempting to align real-world practices with regulatory
rules and oversight. From the changes presented so far, this version,
although far from being enacted, looks like a much better bill for the
financial sector and hopefully will live up to its billing in providing
hope for both consumers and entrepreneurs.
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