Republicans Move to Overhaul Dodd-Frank and the CFPB


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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 oversight.

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 marketplace.

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.


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 sole discretion
  • 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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