Consumer financial protection will remain alive under Trump
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President-elect Donald TrumpDonald John TrumpPapadopoulos on AG's new powers: 'Trump is now on the offense' Pelosi uses Trump to her advantage Mike Pence delivers West Point commencement address MORE’s recent electoral victory came as a surprise to many. As a result, consumer advocates and their allies are now worried that the arrival of Trump’s appointees at agencies such as the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) will be the death of consumer financial protection. Mark Twain once said that “the reports of my death are greatly exaggerated.” The same holds true for reports of the imminent demise of consumer financial protection.

Consumer financial protection will remain alive under new Republican leadership as shown by actions taken by past Republican appointees. Under the leadership of Timothy Muris, President George W. Bush’s first chairman of the FTC, the agency advocated for and implemented a federal do-not-call-list to protect consumers from unwanted telemarketing calls. Under Muris’ leadership, the FTC also resurrected the use of its “unfairness” authority, which had moribund for two decades in response to Hill threats to eliminate the agency because of its drastic overreach in the late 1970s.

History contradicts the conclusion that Republican leadership at the CFPB means the death of consumer protection, including such protection for consumers of financial goods and services. Much consumer financial protection work will continue largely as it has. Much of what consumer protection agencies do is challenge conduct that their leaders, regardless of their ideology or partisan affiliation, recognize must be challenged.

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As the FTC emphasized earlier this fall, stopping fraud is its largest consumer protection program. A large component of the CFPB’s work, especially its law enforcement work, likewise involves challenging fraud or similar conduct that causes harm to consumers, such as financial firms lying about key aspects of their goods and services. There will be many novel and difficult consumer protection issues on which Trump appointees will have differing views than Obama appointees. But the day-to-day agency work of deterring, preventing and remedying fraud and similar conduct that harms consumers will go on.

Consumer financial protection won’t be dead under the next administration. It will include a continued commitment to protect consumers from fraud and similar conduct. But because of the swing of the political pendulum, it will probably look different in 2017 and beyond.

American philosopher Yogi Berra once warned, “It is difficult to make predictions, especially about the future.” While the nature of the changes in approach, agenda and priorities at the CFPB and the FTC depends on who is chosen to run them, it is safe to assume that new leadership will share President-elect Trump’s free-market and less-regulatory views. With that being said, here are three of the greatest changes we are likely to see in consumer financial protection when Trump-appointed leadership arrives.

First, the CFPB’s rulemaking frenzy is likely to stop. Over the course of its five years of operation, the agency has issued many new regulations. For example, its rules affecting mortgage origination, disclosures and servicing have fundamentally reworked mortgage markets. The CFPB has pending rulemakings concerning payday loans, arbitration and debt collection that would fundamentally change those industries as well. The agency also has expressed a long-term interest in making rules on other topics, such as student loan servicing and credit reporting.

Given industry complaints about the burden, complexity and length of the CFPB’s previously issued and proposed regulations, new agency leadership likely will undertake a rigorous and comprehensive reassessment of those regulations. Initiating new rulemakings on additional topics seems very unlikely to be a agency priority. Instead, the new CFPB leadership will likely put its free-market, less-regulatory stamp on changing existing agency rules and halting or reworking its pending rules.

Second, new CFPB leadership likely will use more well-established consumer protection theories like deception and unfairness instead of abusiveness. The Dodd-Frank Act of 2010 allows the CFPB to challenge conduct that is abusive as well as conduct that is deceptive or unfair. Abusiveness, however, is a new consumer protection concept, while there is almost 80 years of FTC precedent under which deception and unfairness have evolved to become clearly focused on preventing unjustified consumer injury.

Financial firms have expressed continued and serious concerns about the vagueness of the new concept of abusiveness. New CFPB leadership is likely to de-emphasize or discontinue the use of its abusiveness authority, focusing instead on using its deception and unfairness authority.

Finally, CFPB expectations on what members of an industry must do in response to the issuance of an agency settlement with a company in that industry are very likely to be altered. CFPB Director Richard Cordray has stressed that all members of industry should comply with the settlement agreements the agency negotiates with individual firms, describing it as “compliance malpractice” not to do so.

The industry has been very critical of the CFPB’s approach because many of the requirements in settlement agreements are tailored to the specific company and therefore are not suitable as general requirements for all members of an industry. New agency leadership is likely to discontinue what many have criticized as CFPB rulemaking by settlement agreement.

Consumer financial protection will not be dead during a Trump administration, but its focus will certainly shift. Everyone should be aware that change is on the way.

Thomas B. Pahl served as a managing counsel at the Consumer Financial Protection Bureau during the Obama administration. He spent more than 20 years working on financial services and consumer protection issues at the Federal Trade Commission and is now a partner in Arnall Golden Gregory’s privacy and consumer regulatory practice in Washington.


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