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    Trump Bump & CFPB Dump?

     

    By: Carly Souther

     

    Carly Souther

     

    Less than two weeks into his administration, President Donald J. Trump has already issued more than a dozen Executive Orders on a wide range of policy areas, ranging from heated subjects such as immigration and health care to less inflammatory topics like placing a hiring freeze on new government employees.

    But what has Trump done that may affect your bank or credit union? The answer, much like the consequences of his other policy actions, is…unclear. s to ensure Trump's appointees have ample time to review and approve any new or pending rules. The memo does, however, provide an exception for certain regulations, including "urgent circumstances relating to health, safety, financial, or national security matters" (Emphasis Added).

    While the "freeze" memo is not unique to this administration, its applicability to the Consumer Financial Protection Bureau (CFPB) is. This is because Trump is the first President to preside over the Agency since President Obama supported the Bureau's creation in 2011. So, the question remains: Does the moratorium affect the CFPB?

    The answer to this query hinges on whether Trump considers the CFPB to be an independent bureau – as it was established under Dodd-Frank—in light of the D.C. Circuit's ruling that the Bureau should be stripped of its independence and placed under the direction of the President. If the ruling stands, then Trump will have the power to fire CEO Richard Cordray and, effectively, dismantle the agency.

    Although Press Secretary Sean Spicer told reporters that, "no decision has been made at this time on that [CFPB leadership]," Vice President Mike Pence has promised to dismantle Dodd-Frank as part of his administration's regulatory reform. Therefore, the reality exists that Trump may attempt to remove Cordray regardless of judicial or congressional support.

    Further, whispers around Washington allege that Cordray could be removed "for cause" under the Dodd-Frank Act. The House Financial Services Committee released a new report that reveals that Cordray may have violated federal law when issuing a 2015 rule that authorized the Bureau to supervise larger participants in the auto lending market.

    As for the pending CFPB rules, we do not yet know whether the final rule on prepaid accounts (effective on the 1st of October) and the mortgage servicing rules amendments (effective on the 19th of October) will be delayed.

    But, the CFPB, Democratic lawmakers, and State Attorneys General are not going to cower nor kiss the ring. The Bureau has petitioned the D.C. Circuit for a rehearing en banc (i.e., the entire court). On the 23d of January, 17 State Attorneys General filed a Motion to Intervene in support of the CFPB, stating their concern that the Trump Administration will "fail to adequately defend the CFPB." In mid-January, Democrats on the House Financial Services Committee wrote a letter "demanding that Trump reject any attempt to remove… Cordray prior to the expiration of his term in July 2018."

    The CFPB has also continued to pursue enforcement actions, which means your institution must stay on top of current Bureau practices.  If you'd like to learn more about the requirements and implications of Dodd-Frank, be sure to register for the following upcoming sessions:

    •       CFPB Diversity Self Assessment Standards & What They Mean for Your Institution, Fri. 17 Feb., at 11AM ET. In August 2016, the final pieces of Dodd-Frank 342 rules were finalized. An institution's diversity self assessments will now be collected and used by the federal banking agencies to "monitor diversity and inclusion trends and identify leading policies and practices in the financial services industry".  
    •       Auditing Your Overdraft Program for Compliance with the Rules & Regulatory Expectations, Thurs., 23 Feb., at 11AM ET. Overdrafts are on the CFPB's future rulemaking agenda, but that hasn't stopped them from issuing enforcement actions before those new rules are issued. In order to address the growing concern of overdraft compliance, financial institutions have started including overdraft risk management in their audit schedules.

     Changing topics, if you're curious whether Trump's Administration has been good for the banking industry, the answer is thus far a resounding "Yes." Now that January's bank-earnings reports are in, many analysts have declared a "Trump bump." The Atlantic explains, "Several major banks are enjoying large upticks in earnings in the wake of the election—at least for now." Marketwatch states that the upward turn in the stock market is the biggest election-to-inauguration gain since President Bill Clinton's second term. Yet, we must also consider the possibility that the market uptick may be a simple reaction to the end of a grueling election cycle "and the uncertainty implicit in picking a new leader."

    Regardless of if you're humoured or outraged by the rise of "alternative facts" and/or traditional media coverage, we at iTrainOnDemand are committed to bringing you timely and relevant banking and financial news. If you ever have any regulatory or political questions, please contact me. Thank you for reading and have a productive and lucractive February!

     

    Best, 

     

      

     

    Carly Souther

     

    COO & General Counsel