The Dodd Frank legislation that created the Consumer Financial Protection Bureau put it under the leadership of a director who has total authority over its activities. Dodd Frank also gave it, for all practical purposes, an unlimited budget without any congressional control. Moreover, the CFPB believes that the language of Dodd Frank enables it to enact virtually any regulation of persons offering financial services or products that it thinks will protect consumers. That sounds to me to be pretty much like a dictatorship. Now, dictators are either good or bad depending on their benevolence and whether you are the favored son or an outsider looking in. In this case, there is no benevolence, consumers are the favored son and financial institutions and their staff are on the outside looking in.
If any of the present Democratic candidates for president are elected, the CFPB will be enabled (and encouraged) to continue on its present agenda unabated. If one of the Republican candidates is elected, not so much. The consensus of the current Republicans in the House and Senate is that the Director of the CFPB should be replaced with a multi-member board and that the CFPB budget should be placed under congressional approval as are the budgets of other government agencies. All of the Republican presidential candidates are in agreement that Dodd Frank is a disaster, but I am not aware of how any of them plan to amend, replace or eliminate it.
Until now, the CFPB has been pretty slow in promulgating new regulations. My guess is that it will speed up the process to enact as much of its declared agenda as possible before a new president is inaugurated. So, what is the CFPB’s agenda? First, I think that we will see enforcement actions of UDAAP that may test the boundaries of the CFPB’s enforcement authority.
Debt collection is the most complained about activity to the CFPB. Two years ago, it published a notice of proposed rulemaking. My guess is that in the relatively near future the CFPB will publish a final rule expanding the debt collection prohibitions and extending them to parties collecting their own debts as UDAAP practices. Likewise, I think the CFPB will finalize a rule on prepaid cards, extending to them many of the protections of Regulation E.
I also think the CFPB will finalize its rules on payday, short term and auto finance loans by placing additional restrictions on them as well as applying the Regulation Z ability-to-pay rules. When that is complete, I think the CFPB will address the issue of NSF and overdraft fees. Obviously, there is a high regulatory animosity to these fees. First, I think there will be a limit on the number of fees that can be charged to a consumer account during a day or some extended time period. Not soon, but at some point in the future, I think the CFPB will regulate the amount that a bank can charge as an NSF or overdraft fee.
Some time ago, there was a movement in California to require that a fee imposed by a financial institution have some relevance to the cost of providing the service or activity that occasioned the fee. In today’s automated world, the cost of returning an item NSF is virtually nothing. NSF fees in the range of $30 and up have to rankle CFPB management.
Finally, I think the CFPB will expand the prohibition of arbitration agreements to all consumer financial transactions. The CFPB believes that arbitration clauses take away from consumers the ability to obtain a redress of their grievances.
The result of the next presidential and congressional elections is anybody’s guess. Depending on which way the elections go, the CFPB's agenda for the next few years could be a little clearer.