Immediately after Donald Trump was elected President in November 2016, the election the mortgage industry was buzzing with articles predicting that a Trump Presidency would mean the death knell for the Consumer Financial Protection bureau (CFPB). It will never happen for several reasons.
First, Mr. Trump did not campaign on a platform to decrease consumer protections in financial transactions. Commentary about less regulations and business growth might be a signal to reduce some of the industry’s regulatory morass to help reduce costs and increase lending opportunities. However if Mr. Trump’s campaign taught us anything, he was not a typical conservative Republican, but rather a more nationalist/populist candidate. His appeal went beyond typical business/corporate interests to working and middle class Americans concerned about the economy, about government expansion, and “ruling elites”, among other issues. Eliminating an agency whose stated purpose is to protect consumers from unfair, unethical and self-serving finance industry practices is not a populist position.
Second, the jury is still out on whether a President Trump can legally remove CFPB Director Cordray and exert influence over how the CFPB will operate. While the recent PHH decision signaled that at least one court considered the independent management structure of the Agency unconstitutional, in that it concentrated too much power into the hands of one person, unelected and without executive branch supervision, that decision is presently being appealed and an affirmation of the lower court ruling is not guaranteed.
Third, the CFPB actually does some really good work. While we may not want thousands of pages of new regulations, and occasionally the Bureau has acted as if it has little practical understanding of how the mortgage industry operates, the truth is that consumers have been better off with the Bureau in place. The CFPB has addressed real issues regarding lack of transparency, spotty accountability and quality lending practices that in a moment of honest reflection seasoned industry professionals must agree made sense.
From where we sit in the ivory tower of SSI, this also means that vendor management rules are unlikely to change. Even the most recent “clarifications” regarding third party servicer provider risk management have not changed the basic premise that lenders who expose their funds and a consumer’s NPPI to strangers must be accountable for doing so. This means knowing who your vendors are, monitoring them for risk and cutting off harmful relationships before a consumer suffers injury or loss.
While Trump Presidency will undoubtedly bring us many interesting and unexpected moments, the elimination of the CFPB and its focus on consume protection will not be one of them. You heard it here first.