Consumer Financial Protection Bureau faces new threat
Senate Republicans, led by Ted Cruz, introduced a new measure to defund the CFPB, a watchdog agency with oversight of mortgages and other financial products.
Republican Senator Ted Cruz has been looking to dismantle or diminish the Consumer Financial Protection Bureau for years without success. But now, with the Trump administration moving quickly to reshape the federal government, Cruz is embracing a bold new approach.
Instead of making the CFPB go away, as he has tried in the past, Cruz is proposing a less direct but equally effective approach: Cutting off its source of funds, The Wall Street Journal reports.
The role of the CFPB: The CFPB was created after the 2008 financial crisis to protect consumers in the financial marketplace. It is responsible for creating, regulating and enforcing rules related to mortgages, credit cards and other consumer financial products. It also fields consumer complaints and offers educational resources.
The agency is funded by the Federal Reserve.
What Cruz is proposing, and what's next: On Jan. 29, Cruz proposed the "Defund the CFPB Act," a measure that would require the Fed to transfer $0 to the CFPB. "Enacting this legislation would save American taxpayers billions of dollars, and I call on the Senate to expeditiously take it up and pass it," Cruz said when introducing the bill.
Republicans hold a 53-47 majority in the house, but passage is not a certainty. They would need to employ the process of budget reconciliation, which allows for a simple majority to approve the change rather than 60 votes typically required. The Senate parliamentarian will make the call on whether budget reconciliation will be allowed for this change.
The motivations behind the proposal: Cruz said the CFPB, which is an independent government agency, is "an unelected, unaccountable bureaucratic agency that has imposed burdensome and harmful regulations on American businesses, banks, and credit unions."
Elon Musk is not a fan either, saying in November that the Trump administration should "delete" the CFPB.
What CFPB allies say: "Gutting the CFPB is an open invitation to the worst actors in our economy to start screwing over working people again," said Jesse Van Tol, who leads the National Community Reinvestment Coalition, which works to build wealth for underserved communities.
The CFPB, which has recovered nearly $20 billion through its enforcement actions, is "the most effective protector of working-class wallets in modern American history," Van Tol said.
Last year, for example, the agency fined Freedom Mortgage — dubbed a "repeat offender" by the CFPB — for submitting incorrect loan data. The company was previously fined for its involvement in an illegal kickback scheme involving agents and brokers at Realty Connect and other firms.