Are the CFPB’s Days Numbered?

According to my regulatory insiders, the answer to the question my headline poses is most likely “No.” But as we found out on Election Day, anything is possible. And I do believe the regulatory environment will be more favorable going forward.

It’s difficult to say what the election of Donald Trump to the presidency will mean to an industry that, according to the National Automobile Dealers Association, has “effectively spent” the pent-up demand generated by the Great Recession. Still, 17.1 million new units, which is NADA Chief Economist Steven Szakaly’s forecast for 2017, is still pretty darn good.

But that wasn’t the end of Szakaly’s forecast. He said the sales environment could improve even more if President-elect Trump pursues his stated policy objectives of lowering corporate taxes, increasing infrastructure spending, and lowering the regulatory burden in the banking, automotive and energy sectors.

“The question, of course, is, will these net benefits be outweighed by possible net negatives, which are, of course, the outlook on immigration and the outlook on free trade,” Szakaly said. “I tend to favor the idea that we will see some significant reforms on the tax side. We will see some fairly large spending in terms of infrastructure, and I think we will see a reduction in the regulatory burden far sooner than we will see the negative consequences from any immigration crackdown [or] reductions in free trade.

“Overall, I think the second half of 2017 could very well surprise both for gross domestic product growth and for motor vehicles,” he continued. “So the possibility exists that if all of these policies come to fruition, we could see a year that’s going to be closer to 17.3 or 17.4 million rather than the 17.1 that we’re looking at as sort of a baseline.”

Szakaly said we’ll know how the year will unravel by the end of February or beginning of March. He noted, however, that some of Trump’s “stated or understood policy objectives” could take years to realize, if ever.

That’s what my regulatory insiders said when I emailed them this statement from Trump’s GreatAgain.gov website: “The Financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation.”

Trade groups like the American Financial Services Association (AFSA) and the NADA declined to speculate on whether that’s possible, and what it could mean to the industry’s three-year battle with the Consumer Financial Protection Bureau (CFPB) over the agency’s targeting of dealer participation.

A constitutional challenge is one way the Dodd-Frank Act could be undone, although my sources say that ship has sailed. A federal appellate court did rule in October that the CFPB’s single-director structure is unconstitutional. Although it stopped short of calling on the bureau to be shut down, the court gave the president the authority to remove the bureau’s director at will, as well as supervise and direct his activities.

While that could certainly stunt the bureau’s activities, my insiders believe the bureau is preparing to appeal the ruling.

The Trump administration could also repeal and replace Dodd-Frank. A replacement bill, the Financial CHOICE Act of 2016 (H.R. 5983), was passed by the House Financial Services Committee this past September. However, the measure has sat in a House subcommittee ever since. The legislation contains language found in 73 other bills introduced during the 114th Congress, including two bills, S. 2663 and H.R. 1737, that aim to repeal the CFPB’s March 2013 guidance on dealer participation.

However, my insiders say replacing Dodd-Frank would require new federal laws that would have to pass the House and the Senate, with one of them noting that “Democrats are not without power.” In other words, Senate Democrats can block any measure that doesn’t get 60 votes — that’s “unless Republicans invoke the ‘nuclear option’ and change the cloture to a bare majority,” my insider noted.

“Even if they did that, there are a few Republican senators, I think, who would stop far short of dismantling Dodd-Frank,” he added. “If that is correct, any attempt to change Dodd-Frank will have to have bipartisan support to pass the senate.”

Keep in mind that the CFPB exists independent of the law that created it, so repealing Dodd-Frank doesn’t mean the bureau will go away. “For our industry, the real question is whether ‘dismantling Dodd-Frank’ means abolishing the CFPB,” my insider said. “I do not think that will happen. The House of Representatives bill that will weaken the CFPB may pass, but the CFPB, I predict, will survive.”

So there you have it. It’s game on for the foreseeable ­future.