Banks wanted America's consumer watchdog to change — but not like this

Banks wanted America's consumer watchdog to change — but not like this
Banks wanted America's consumer watchdog to change — but not like this

Banks have been pushing for changes to America's consumer watchdog agency ever since it was established in the aftermath of the financial crisis. But now, they might get more than they bargained for.

A draft bill from Rep. Jeb Hensarling (R-Texas) would fundamentally alter the structure of the Consumer Financial Protection Bureau by allowing the president to fire the agency's director, according to a document obtained by CNBC. Currently, the director is a political appointee but can only be removed in extreme circumstances.

"We have set up, basically, a dictator," Hensarling said in an interview Thursday on CNBC. "I'm not offended by having consumer financial protection in one agency, but not an agency that is unaccountable to the president."

But banks say the proposal goes too far.

Instead of a director who can be fired, industry groups have called for a bipartisan five-member commission to lead the CFPB. The structure mirrors that of other regulatory agencies — such as the Securities and Exchange Commission and the Federal Communications Commission — and industry groups are now hoping that Hensarling will scale back his plans.

"Our legislative, statutory policy position has always been for a broader five-member bipartisan commission rather than a single director," said Paul Merski, executive vice president at the Independent Community Bankers of America. "When you have a single director, depending on who is in power and who appoints that single director, you could have the regulatory pendulum swinging back and forth dramatically."

In other words, a regulation-slashing director installed by President Trump might be welcomed by the industry in the short term, but it all could be reversed after the next presidential election. In the long run, banks say they prefer the relative stability of a commission.

"This agency is very powerful in that it regulates a huge influential industry," said Elizabeth Eurgubian, senior counsel at the Credit Union National Association. "Several perspectives are needed so that rules and enforcement actions are thought out and good policy can take place."


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