How the 2024 Presidential Election Could Reshape the CFPB

How the 2024 Presidential Election Could Reshape the CFPB Informed

On January 20, 2021, just one hour after President Biden’s inauguration, then Consumer Financial Protection Bureau (CFPB) Director Kathy Kraninger resigned from the CFPB at the President’s request.   

Kraninger’s resignation reflects the new reality of CFPB Directors articulated in the 2020 Supreme Court decision, Seila Law v. Consumer Financial Protection Bureau. Seila Law held that the CFPB director serves at the pleasure of the President. If Donald Trump is elected this Fall, the pattern will repeat, and we would expect current Director Rohit Chopra to resign and a new CFPB Acting Director installed on January 21, 2025.

So how would a change of Presidency affect the fate of existing CFPB policies and planned agenda? Here’s an overview of CFPB policies and agency actions up for grabs this fall.

CFPB and The Congressional Review Act

Let’s start with the Congressional Review Act (CRA), perhaps the most powerful lever a new Administration could use to roll back CFPB rules. The CRA requires agencies to report new rules to Congress and affords Congress a sixty legislative-day window to overturn the rule. The barrier to overturn the rule is high. Both Houses of Congress must adopt a joint resolution of disapproval and the President must sign it.   

While members of congress can file CRA resolutions within any sixty-day legislative window, CRA resolutions are most frequently used when presidential administrations change.  Federal agencies are part of the Executive Branch and typically submit their rules to the Office of Management and Budget (OMB) for review and endorsement by the President. Consequently, any rules issued during a President’s term, even by independent agencies, presumably have the President’s support, and the President would likely veto any Congressional resolution of disapproval.

A CRA resolution must be passed by both Houses of Congress. So for Republicans to utilize CRA to its greatest effect, they would need to win a clean sweep of the Presidency, the Senate and the House. 

Though the legislative calendar could change, prognosticators believe the cut-off to escape the reach of a new Administration was between late May and early June.

As of the writing of this blog, the following final or proposed CFPB rules could be subject to CRA review:

Besides the CRA, here are other ways a new administration could impact the regulatory actions of the Biden-era CFPB.

CFPB Delaying the Finalization or Implementation of Rules or Initiatives

Once in office, Directors can also affect the Agenda by slowing down or withdrawing proposed rules before they are finalized. Or they can delay the implementation date or initiate a new rulemaking to revoke the first one. (This happened with the payday lending rule in 2017/2018). 

There are a number of proposed rules still in the drafting queue at CFPB headquarters that a new director could theoretically quash or delay if they are not finished by January 21, 2025.

Similarly, the CFPB has launched an auto data collection initiative that a new Director could halt in its tracks.

Revising Guidance

Director Chopra has frequently relied on policy statements and other types of non-rulemaking guidance to communicate the Bureau’s legal and policy position on issues to industry without having to undertake the more rigorous and time-consuming process of notice-and-comment rulemaking. To remain in effect, however, such guidance depends on having the  sitting Director support them.

One should expect that a new administration would carefully review guidance issued by Director Chopra and potentially. Then they can rescind guidance if they disagree. Given the negative feedback, one should expect the CFPB Policy Statement on Abusive Conduct and its Exam Manual Revisions to Address Discriminatory Practices to endure intensive scrutiny under a Trump-led CFPB. There is precedent – the CFPB’s prior policy statement on Abusive Acts from 2020 was rescinded very early in this administration.  

Other notable Policy Statements and Guidance by the Chopra-led CFPB which could be subject to reconsideration include::

Impact on Enforcement

Enforcement is another area where changes in administration have consequences. Whatever enforcement priorities a Trump Administration would have, they are likely to diverge from the cases pursued by the Chopra-led CFPB. Some enforcement actions will likely wither under the eyes of new leadership.

When there’s a party change, the incoming regime usually puts a hold on regulations, enforcement actions, and major initiatives until they can review them. So, industry should expect a halt in most-pending CFPB initiatives upon change in Party control and leadership.

Policy Ping-Pong

When thinking of policy changes, the tortured history of the CFPB’s innovation initiatives offers a classic case study as to how administration changes can redefine agency priorities.

Under Director Cordray, the CFPB stood up Project Catalyst, to encourage consumer-friendly developments in the consumer financial marketplace. In 2018, Director Kraninger, a Trump appointee, created the CFPB Office of Innovation. He issued new, industry-friendly innovation policies to leverage sandboxes, no-action letters and regulatory relaxing techniques that enabled testing new products. 

Years later, Director Chopra, a Biden appointee, reversed course by rescinding most of Kraninger’s policies. He moved away from the philosophy of engaging with individual stakeholders to promote regulatory relief. They rebranded the Office of Innovation as the CFPB Office of Competition and Innovation. Then, changed their mandate, with the new goal of promoting innovation and identifying stumbling blocks to new market entrants. Each of these initiatives put its own spin on the challenges of innovation. We should expect that any change in party control of the CFPB leadership will continue this policy ping pong.

Conclusion

Elections have consequences. Depending on how this election turns, we could either see a very different CFPB in 2025 or more of the same.

author avatar
Tom Oscherwitz VP of Legal
Tom Oscherwitz is Informed’s VP of Legal and Regulatory Advisor.  He has over 25 years of experience as a senior government regulator (CFPB, U.S. Senate) and as a fintech legal executive working at the intersection of consumer data, analytics, and regulatory policy.

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