Earlier this week, two Republican lawmakers introduced companion bills to eliminate the Consumer Financial Protection Bureau (CFPB). The bills from Senator Ted Cruz (R-Texas) and Representative John Ratcliffe (R-Texas) would repeal Title X of the Dodd-Frank Act, which established the CFPB. For a discussion of Title X of the Dodd-Frank Act, see Practice Note, Summary of the Dodd-Frank Act: Consumer Financial Protection. These bills are the latest in a series of legislative and executive measures designed to, at least in part, dismantle the consumer watchdog agency.

As we reported previously (see Legal Update, Trump Administration Issues Executive Order on Financial Regulation and Memo on DOL Fiduciary Rule), on February 3, 2017, the President signed an Executive Order that will require the Secretary of the Treasury to consult with the heads of the member agencies of the Financial Stability Oversight Council and report to the President within 120 days on the extent to which existing laws, treaties, regulations, guidance, reporting and recordkeeping requirements, and other Government policies promote certain “core principles.” This report must identify any laws, treaties, regulations, guidance, reporting and recordkeeping requirements, and other Government policies that inhibit Federal regulation of the United States financial system in a manner consistent with these core principles. While the Executive Order does not specifically mention the CFPB or consumer financial protection, the Executive Order and its core principles can be read to implicate the regulation of consumer financial services. As such, there is a significant likelihood that the Executive Order may provide a basis for challenging the existence of the CFPB and its extensive rulemaking, including the agency’s regulations and guidance applicable to various financial sectors.

In addition to the Executive Order, other legal mechanisms may succeed in dismantling the CFPB’s rulemaking and guidance. In particular, the Financial Choice Act of 2016 (the Act), which aims in part to dismantle the CFPB’s “larger participant” rulemaking and auto lending guidance, passed in the House Financial Services Committee in September and could succeed in a Republican Congress. If passed, the Act also would strip the agency of its authority to bring cases against financial institutions under the unfair, deceptive or abusive acts or practices (UDAAP) provision.

If the current Administration succeeds in dismantling the CFPB, financial institutions may be forced to revisit many of the policies and procedures they have implemented in response to the Dodd-Frank Act and related CFPB rulemaking. However, it would be oversimplifying the situation to assume that the financial regulatory world will simply return to its pre-Dodd-Frank days. The future of consumer financial regulation will depend on the degree to which these opposition measures ultimately succeed in picking apart the CFPB and its rulemaking. At a minimum, financial institutions will continue to be subject to liability under many federal laws, such as the Equal Credit Opportunity Act and the prohibition on unfair and deceptive practices enforced by the Federal Trade Commission.