Politics & MoneyMortgage

CFPB funding slashed, enforcement authority reined in by Trump budget

More changes afoot for agency already in the crosshairs?

Back in May 2017, President Donald Trump’s 2018 federal budget proposal put the Consumer Financial Protection Bureau in its crosshairs, recommending slashing the bureau’s budget to almost nothing as a method to rein in the seemingly negative impact of the CFPB on consumers.

On Monday, the White House released its 2019 budget proposal, and for the second time, took dead aim at the CFPB.

While the 2018 version proposed cutting the CFPB’s funding and bringing the agency’s funding under the Congressional appropriations process to increase oversight, the 2019 version also calls for those measures but also goes much further to reshape the CFPB’s mission altogether.

As the 2018 budget proposal previously did, the 2019 version also contains a section called “Restructure the Consumer Financial Protection Bureau.”

But the 2019 version is different because it proposes significantly reducing the CFPB’s enforcement authority.

“To prevent actions that unduly burden the financial industry and limit consumer choice, the proposal restricts CFPB's broad enforcement authority over Federal consumer law,” the budget proposal states. “These changes would allow CFPB to focus its efforts on enforcing enacted consumer protection laws and eliminate the functions that allowed the Agency to become an unaccountable bureaucracy with unchecked regulatory authority.”

The proposal does not provide additional specifics on just how the CFPB’s enforcement authority would be restricted, but the Trump administration’s impact on the CFPB is already being felt deeply at the bureau.

Recently, CFPB Acting Director Mick Mulvaney told the bureau’s employees that the agency was ending regulation by enforcement, stating that the agency works not only for consumers, but also for the companies it supervises.

Mulvaney also reportedly stripped the bureau’s Office of Fair Lending of its enforcement powers, announced that the CFPB would “reconsider” its payday lending rules, defanged the changes in Home Mortgage Disclosure Act reporting that were to take effect this year, and reportedly put the brakes on the agency’s investigation into the massive data breach at Equifax.

Trump’s budget proposal, which Mulvaney oversees in his other job as director of the White House Office of Management and Budget, would bring further changes to the CFPB.

Currently, the CFPB gets its funding from the Federal Reserve, but Trump’s budget would shift the CFPB’s appropriations process to Congress beginning in 2020, a move that other Republicans have long pushed for.

As the 2018 proposal previously called for, the 2019 budget proposal would severely limit the CFPB’s budget moving forward.

Trump’s budget calls for the CFPB’s 2018 budget to be reduced by $147 million to $545 million, which is equivalent to its 2015 level.

The CFPB’s 2019 budget is not currently available, but for reference, the bureau’s budget for 2016 was $575.6 million. In 2017, the CFPB’s budget was $646 million, and for 2018, the CFPB’s projected budget is $630.4 million.

So decreasing the CFPB’s budget to $545 million in 2019 would almost certainly represent a significant decrease to the agency’s funding.

From there, Trump’s budget proposal would decrease the CFPB’s budget by $610 million in 2020, $656 million in 2021, $672 million in 2022, $687 million in 2023, and on from there.

“CFPB, created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, is an independent agency with a single unaccountable director who is able to draw funding from the Federal Reserve without oversight from the Congress. The Agency also has broad authority to unilaterally develop and enforce regulations irrespective of congressional intent or economic impact,” the budget proposal states.

“The CFPB’s short history is rife with examples of the poor financial and personnel management decisions that can result from this form of unchecked authority. For example, the Government Accountability Office found multiple issues with CFPB’s design and implementation of its internal controls over financial reporting,” the budget proposal continues.

“The Agency also faced personnel management challenges that resulted in congressional and GAO investigations regarding allegations of discrimination and retaliation against employees,” the proposal continues. “The Budget proposes to address these issues through legislative reforms to restructure the Agency, bring accountability to its leadership, and safeguard against potential abuses of these powers.”

Unsurprisingly, CFPB critics hailed the proposal, while bureau defenders decried it.

“President Trump’s budget rightly recognizes that the CFPB has not only limited options for consumers and devastated Main Street banks, credit unions and entrepreneurs, it has also been a huge drain on taxpayers,” Competitive Enterprise Institute Senior Fellow John Berlau said in a statement.

“The hundreds of millions of dollars it received from the Federal Reserve for its operations would otherwise be sent by the Federal Reserve to the Treasury Department to reduce taxpayers’ burden,” Berlau continued.

“Because of this clear impact on the budget, Congress should defund the CFPB through the budget reconciliation process, which only requires a simple majority vote,” Berlau concluded. “Then, Congress can debate whether to put the CFPB under the regular appropriations process or give its core consumer protection functions to other agencies and departments. Both options would restore needed accountability.”

Rep. Maxine Waters, D-Calif., the ranking member on the House Financial Services Committee, said that Trump’s budget will open the door to another financial crisis.

“Trump’s budget proposal would harm American consumers, hurt our nation’s communities and wipe out financial reforms that are in place to prevent another financial crisis,” Waters said. “Trump proposes to eliminate the Consumer Financial Protection Bureau’s independent funding and to curtail its ability to protect consumers and hold Wall Street and bad actors accountable.”

To read Trump’s budget proposal in full, click here. The CFPB portion is on page 199 of 202.

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