Reports of CFPB’s Demise have been greatly exaggerated

May 17, 2017 at 10:19 am Leave a comment

Last Thursday, Congressional efforts to kill regulations set by the CFPB extending certain protections currently given to debit cards to pre-paid card holders quietly died; the regulations take affect April 2018. Even if you don’t offer pre-paid cards this speaks volumes about the regulatory environment in which we will find ourselves for years to come.

First, a slight digression since I really enjoy this subject. In 1996 Congress passed and Hillary Clinton’s husband signed into law the Congressional Review Act (5 U.S.C. § 801-808). Under this legislation final regulations must be submitted to congress and it has 60 days – excluding certain breaks- to pass a resolution blocking them from taking effect. Since regulators have way too much power, this statue sounds great, but its bark is much worse than its bite. After all, in order for a regulation to be blocked both houses of congress would have to vote to repeal it, and there is always the possibility of a veto.

With Congress and the presidency in Republican hands, the act has become a potent weapon with which to undue many regulations promulgated in the final days of the Obama administration. Since Donald Trump took office in January (yes it has only been 4 months) Reuter’s reports that congress has used the Congressional Review Act to kill 14 pending regulations.

This brings me back to the CFPB’s prepaid card regulation. In early February, Senator Perdue of Georgia introduced a joint resolution to block the regulation. He complained in a press release that “If the CFPB wants to continue to impose rules and regulations that impact every American’s financial well-being, it must answer to the American people.” In the same press release Senator Cotton of Arkansas called the rule “a disaster for consumers attempting to access prepaid cards,” In short, the regulation seemed like precisely the type of CFPB mandate that the free market, anti-regulation congress would quickly make go away. But on Thursday the deadline for repealing this bill came and went.

Consumer groups are right to point to this failure as a strong indication that the CFPB, or at least the regulations it has promulgated to date, are alive and well. After all, if congress doesn’t have the appetite to repeal an esoteric regulation dealing with a specific segment of the consumer finance market, then hopes of forging a bi-partisan consensus on changes to the CFPB seem doomed.

I have a sneaking suspicion we are seeing a reemergence of the same pattern that has made it so difficult for Republicans to “Repeal and Replace” Obamacare. Republicans were unified in their opposition to Obamacare until they had to explain to their constituents that they would lose coverage under the Republican alternative. Now Republicans might be growing skittish over taking on the CFPB if that means repealing consumer protection regulations that consumers like.

Don’t get me wrong. The pre-paid card rule has its defects. And, with or without changes to the CFPB’s structure, we will eventually have a CFPB director appointed by President Trump. Unfortunately however, needed regulatory changes may not be as a dramatic or come as quickly as we would like to see.

Entry filed under: Compliance, General, Legal Watch, Regulatory. Tags: , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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