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Senate Republicans unveil bill to replace CFPB director with committee

Will the third time be the charm?

While the Consumer Financial Protection Bureau, with the support of top Democratic Party leaders and 17 Democratic state attorneys general, is fighting in court to defend its leadership structure, a Republican-led effort in the Senate could render the legal battle over the CFPB a moot point.

On Tuesday, Sens. Deb Fischer, R-Nebraska; John Barrasso, R-Wyoming; and Ron Johnson, R-Wisconsin, introduced a bill that would replace the single director of the CFPB with a five-member bipartisan committee, a change the Republican Party has long pushed for.

According to Fischer's office, this is actually the third version of this bill, which she previously introduced in each of the previous two congressional sessions to no avail. Even if either of those previous version of the bill had passed out of Senate, the bill would almost certainly have been vetoed by President Obama. 

But combine the fact that President Trump is already making moves to potentially fire Cordray or possibly weaken the CFPB with regulatory rollbacks, with the Republican majorities in both the House and the Senate, and the third time could be the charm for Fischer's bill.

The bill comes at a critical time for the CFPB, which is currently fighting for its continued existence in court.

Last year, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit ruled that the CFPB’s leadership structure was unconstitutional and vacated a $103 million increase to a $6 million fine levied against PHH by CFPB Director Richard Cordray.

Last week, Sen. Sherrod Brown, D-Ohio, and Rep. Maxine Waters, D-Calif., who are, respectively, the Ranking Members of the Senate Banking Committee and the House Financial Services Committee, filed a motion to intervene in the battle between the CFPB and PHH.

That request followed a motion from the Democratic state AGs, who filed a similar motion suggesting that the Trump administration may not defend the CFPB with as much vigor as the Obama administration did.

Those motions were part of the ongoing fight over the CFPB, which is currently awaiting a decision over whether the Court of Appeals will rehear the case.

But even if the court does decide to rehear the case, and rules in the CFPB’s favor, thereby preserving that the CFPB director can only be removed “for cause” by the president rather than “at will,” the leadership structure of the CFPB could soon change anyway thanks to Fischer's bill.

The new bill from the trio of Republican senators is called the Consumer Financial Protection Board Act, and would change the leadership structure of the CFPB to a five-member board of directors, who would be appointed by the president and approved by the Senate.

If the bill becomes law, the president would then appoint one of the five members of the board to serve as chairperson of the board. Under the terms of the bill, the CFPB board members would serve staggered five-year terms.

Additionally, no more than three members could be from the same political party.

The text of the bill stipulates that the board members must “have developed strong competency and understanding of, and have experience working with, financial products and services.”

Additionally, the bill states that the board members can be removed by the president for “inefficiency, neglect of duty, or malfeasance in office.”

In a statement, Fischer said that the “bad decisions” made the CFPB director are keeping American families “locked out” of economic opportunities.

“My bill would prevent this misconduct by divesting the authority from one director to a five-member bipartisan board,” Fischer said. “This much-needed structural adjustment would bring accountability to the bureau and give more Americans a chance to build their own businesses and provide for their families.”

A similar effort is also underway in the House of Representatives, as replacing the single CFPB director with a committee is part of the Financial CHOICE Act, the Republican effort to repeal and replace the Dodd-Frank Wall Street Reform Act. 

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