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Legal, Regulatory, and Privacy Issues

How will the new Democratic Congress affect consumers?


The incoming Democratic House majority will be emboldened to push pro-consumer legislation and will likely ratchet up their scrutiny of the Consumer Financial Protection Bureau.

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The new Democratic Congress could shape Americans’ financial lives through strict government oversight and consumer-friendly laws.

Yet even though the incoming majority will be emboldened to push through pro-consumer legislation, consumer advocates aren’t holding out much hope that such measures will make their way to President Trump’s desk, given that Republicans simultaneously will strengthen their grip on the U.S. Senate.

While not optimistic about substantial pro-consumer legislation winding its way through the soon-to-be-politically-split Congress, consumer advocates expect Democratic members of the House to ratchet up their scrutiny of the Consumer Financial Protection Bureau (CFPB), the federal government’s consumer watchdog.

See related: Bill that could help prevent synthetic ID fraud passes Congress

Waters-led House panel will clamp down on CFPB

That scrutiny could intensify now that the bureau’s new Trump-appointed director, Kathy Kraninger, is in place. In a party-line 50-49 vote Dec. 6, the Senate confirmed Kraninger, who had been associate director of the U.S. Office of Management and Budget (OMB).

In the Democrat-controlled House, Kraninger is bound to be called to testify before the House Financial Services Committee, which oversees the CFPB. The lawmaker assuming the panel’s chairmanship, Rep. Maxine Waters, a California Democrat, has vigorously criticized the bureau’s management under the Trump administration.

Bart Naylor, financial policy advocate at the Congress Watch division of Public Citizen, a consumer advocacy group, said Waters’ ascent to leadership of the House Financial Services Committee will make a “major difference” for pro-consumer efforts.

“She’s a proven champion of consumers and can be expected to press for needed reforms,” Naylor said.

Waters and other congressional Democrats complain that under the temporary reign of Kraninger’s old boss – Mick Mulvaney, whose full-time gig is director of the OMB – the CFPB’s powers have been watered down. Mulvaney had overseen the bureau since November 2017.

On Dec. 4, The Washington Post reported that the CFPB had “gotten smaller, quieter and less active under Trump.” The Post cited weakened punishment of bad actors in the financial services industry, a shrunken CFPB workforce and less public education about consumer finance issues.

Those bad actors include credit-reporting bureau Equifax, where a 2017 data breach exposed the personal data of 148 million American consumers, and Wells Fargo, which has come under fire for a string of consumer abuses.

In the Democrat-controlled House, CFPB Director Kathy Kraninger is bound to be called to testify before the House Financial Services Committee.

Carter Dougherty, communications director at the nonprofit advocacy group Americans for Financial Reform, said the Mulvaney-led bureau had “gone off the rails.”

With Waters at the helm of the Financial Services Committee, her pending bill to fortify the CFPB almost certainly will come up for a vote and wind up being considered by the full House. However, Senate Republicans – whose majority will rise to 53 members in January – likely would block the legislation if the House passes it.

In October, Waters, then the ranking member of the Financial Services Committee, introduced the Consumers First Act, which she said, would reverse the dismantling of the CFPB and halt the Trump administration’s anti-consumer agenda. Five of her Democratic colleagues on the committee co-sponsored the bill, whose provisions include limiting the bureau’s hiring of political appointees and requiring adequate CFPB staffing.

In a statement Dec. 6, Waters pleaded with Kraninger to roll back “anti-consumer actions” embraced by Mulvaney, a former South Carolina congressman, and pave the way for the bureau “to resume its work of protecting hardworking Americans from unfair, deceptive or abusive practices.”

Over the past several years, Republicans in Congress have sought to curtail the CPFB’s authority and even have called for the agency to be shut down. Those moves have faced fierce resistance from congressional Democrats, including Waters.

Over the past several years, Republicans in Congress have sought to curtail the CFPB’s authority and have even called for it to be shut down.

Brian Young, public policy manager at the nonprofit National Consumers League, said that thanks to Democrats grabbing the reins of the House, Waters and other pro-consumer lawmakers will be empowered to pose “uncomfortable questions” to CFPB officials “who may be falling short of their congressionally mandated responsibility to protect American consumers.”

Certain to be at the top of the list of CFPB officials who’ll be summoned to Capitol Hill to answer those “uncomfortable questions” is Kraninger, who enjoys firm support from Trump and Sen. Mike Crapo, an Idaho Republican who chairs the Senate Banking, Housing and Urban Affairs Committee. Crapo’s panel oversees the CFPB.

In nominating Kraninger for the CFPB post in July, Trump lauded her as the “right leader to reform and refocus” the agency. The president railed that years of “poor leadership” – referring to the original head of the bureau, Richard Cordray, an appointee of President Obama – had made the agency an “ineffective, poor steward” of federal money.

Crapo said in July that he had “the utmost confidence” in Kraninger’s ability to direct the bureau’s enforcement of consumer finance laws, protect consumers’ personal data, broaden access to credit and make the CFPB “more transparent and accountable.”

In opposing Kraninger, Sen. Elizabeth Warren, a Massachusetts Democrat who was the bureau’s architect, said on the Senate floor: “It isn’t Ms. Kraninger’s management experience that got her a giant promotion, it’s her enthusiasm for Mick Mulvaney’s anti-consumerism agenda that earned her this reward from President Trump.”

See related: CFPB considers deleting complaints from website 

Don’t expect another Dodd-Frank

While Democrats in the House are set to pounce on Kraninger, they’re unlikely to be able to make much headway with significant pro-consumer legislation, observers say.

Young said a divided government – with Republicans commanding the Senate and White House, and Democrats controlling House – will prevent Democrats from passing landmark pro-consumer legislation like the Dodd-Frank Act, which passed in 2010.

Instead, the “key power” of House Democrats, he said, will be the ability to prevent anti-consumer legislation from becoming law.

“When must-pass bills come up, [House Democrats] can now demand that anti-consumer provisions be removed and can even demand some more modest protections be included in the bills,” Young said.

Naylor of Public Citizen said Waters also might be able to collaborate with Crapo, her Senate counterpart, on modest pro-consumer efforts.

For instance, Pamela Banks, senior policy counsel at Consumers Union, the advocacy arm of Consumer Reports, noted Crapo shepherded a bill enacted in 2017 that, among other things, bars credit-reporting bureaus from putting debt from health care services delivered through the U.S. Department of Veteran Affairs’ Choice Program on the credit reports of military veterans.

Banks said Crapo might be inclined to work with Waters on a plan backed by Consumers Union to exclude medical debt from the credit reports of all consumers, not just military veterans.

See related: CFPB rollback of payday loan protection draws criticism

Credit report cleanup bill could gain traction

Another piece of Waters-authored legislation that is sure to gain traction, at least in the House, is the Comprehensive Consumer Credit Reporting Reform Act. Waters initially introduced the measure in 2017 after the Equifax data breach came to light. Waters said the bill would overhaul the country’s “broken” credit-reporting system. Among other things, the proposal would:

  • Place the burden on credit bureaus, not consumers, to ensure consumer data is accurate and complete.
  • Restrict the use of credit information for employment purposes.
  • Limit the amount of time that negative information can remain on a credit report.
  • Offer free credit-monitoring and identity theft services to at-risk consumers.

Aside from bringing up favored pro-consumer bills and spotlighting what she characterizes as shoddy management of the CFPB, Waters is looking at establishing a House subcommittee that will focus only on consumer protection issues, according to American Banker.

As Rep. William Lacy Clay, a member of the House Financial Services Committee, has said of the impending Waters-orchestrated shakeup, “There’s a new sheriff in town.”

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