Although the agency was created by Democrats in an effort to protect consumers from abusive financial practices, it has continued to be viewed by Republicans as an unchecked power
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With Republicans now leading the House, Senate and White House, a renewed effort is underway to essentially dismantle the Consumer Financial Protection Bureau (CFPB), an agency created by Democrats after the 2008 financial crisis to create safeguards for consumers against predatory lending.
The CFPB holds authority to create and enforce rules regarding consumer financial products, including mortgages and credit cards. Although the agency was created by Democrats in an effort to protect consumers from abusive financial practices, it has continued to be viewed by Republicans as an unchecked power, since its funding comes directly from the Federal Reserve and not through the appropriations process.
In the past, Senator Ted Cruz (R., Texas) has introduced bills to dissolve the agency, but took a different tack on Wednesday in presenting a new measure, The Wall Street Journal reported. Senate Majority Whip John Barrasso (R., Wyoming) and Senators Mike Rounds (R., South Dakota), Steve Daines (R., Montana), Marsha Blackburn (R., Tennessee) and Rick Scott (R., Florida) joined Cruz in his new proposal.
The legislation, unlike past proposals, does not seek to repeal the measure that created the CFPB, but instead suggests restricting the amount of money that the Federal Reserve could transfer to the CFPB to $0.
“The CFPB is an unelected, unaccountable bureaucratic agency that has imposed burdensome and harmful regulations on American businesses, banks and credit unions,” Cruz said in a statement. “It is an unchecked Obama-era executive arm and the Federal Reserve should not be transferring funds to it. Enacting this legislation would save American taxpayers billions of dollars, and I call on the Senate to expeditiously take it up and pass it.”
Republicans did not succeed in dismantling the CFPB during the first two years of President Trump’s first term when the party controlled both Congress and the White House. But this time around, Cruz’s office believes the proposal could be advanced through “budget reconciliation,” which would allow the proposal to bypass the Senate’s 60-vote threshold that must be hit in order for legislation to pass.
Republicans also plan to use budget reconciliation to advance parts of the president’s agenda on tax cuts and border enforcement.
Proposals can qualify for budget reconciliation if they involve a fiscal change and have a substantial impact on the budget. The proposal need only receive a majority vote to obtain budget reconciliation. Currently, Republicans hold a 53-47 majority in the House.
It is still unclear, however, whether or not the CFPB can qualify for budget reconciliation because its funding lies outside of the congressional appropriations process.
The Senate parliamentarian, Democrat Elizabeth MacDonough, determines which provisions qualify for budget reconciliation. In 2021 when Democrats held the House, Senate and White House, she rejected a proposal to raise the minimum wage to $15 per hour under budget reconciliation as well as a separate attempt to legalize a group of immigrants living in the U.S. on humanitarian grounds.
The Supreme Court rejected a challenge last year to the CFPB, arguing that Congress established authority when it launched the bureau to insulate its funding stream from politics.
Advocates of the agency say crippling it would leave everyday Americans vulnerable.
“Gutting the CFPB is an open invitation to the worst actors in our economy to start screwing over working people again,” Jesse Van Tol, who leads the National Community Reinvestment Coalition, said in response to a tweet from Elon Musk in November calling for the government to “delete CFPB.”
In addition to protecting consumers from unfair, deceptive, or abusive lending practices, the CFPB polices illegal kickbacks in the real estate industry.
The legislation that created the CFPB, the Dodd-Frank Wall Street Reform and Consumer Protection Act, transferred regulatory oversight of the Real Estate Settlement Procedures Act (RESPA) from the Department of Housing and Urban Development (HUD) to the CFPB.
RESPA includes a number of restrictions and prohibitions aimed at preventing mortgage lenders and settlement services providers like title insurers from paying real estate agents and brokers for sending their business their way without providing proper disclosures to consumers.
Last year, the CFPB fined “repeat offender” Freedom Mortgage for submitting incorrect loan data. Previously, the mortgage provider had been fined for its involvement in an illegal kickback scheme in conjunction with agents and brokers from Realty Connect and elsewhere.
The agency also sued Rocket Homes in December, alleging the mortgage provider of an illegal kickback scheme with agents to steer clients to the company.
The CFPB has recovered nearly $20 billion in consumer relief, according to its website.