Stymied by an appeals court decision that made it more difficult for the Trump administration to fire Richard Cordray as the director of the Consumer Financial Protection Bureau, Republicans have shifted their strategy to trying to contain the bureau.
They have opened multiple fronts against the agency, undertaking separate efforts through obscure legislative processes to cut its funding and roll back past and future rules, while also considering a larger bill that would effectively gut the agency entirely.
In speeches this week, top Republican leaders made it clear that they see themselves as at "war" with the CFPB, and are willing to use any means in their arsenal to battle back against it.
"We fought a war to get rid of the king and now it’s time to bring the unconstitutional CFPB’s war on credit and war on consumer choice to an end. We will win this war,” House Financial Services Committee Chairman Jeb Hensarling said during a speech to the Credit Union National Association's government affairs conference this week.
The moves are a switch from an early focus on restructuring the leadership of the agency and targeting its director. Hensarling and other Republicans have publicly urged President Trump to fire Cordray directly. But the administration's legal power to do so is murky, and a court case on the issue is still in play, with oral arguments scheduled to take place in May.
As a result, Republicans have sidelined efforts to replace the CFPB's director with a five-member commission and focused on other ways to rein in the bureau.
Rep. Blaine Luetkemeyer, R-Mo., said Republicans would seek to cut the agency's funding through reconciliation, which requires only a majority vote on budgetary items and is not subject to Senate filibuster.
"There is only one group in this town that can make law and that's Congress, it is not the CFPB," Luetkemeyer said at the CUNA conference on Wednesday. "We may start the bill process this summer to put into the reconciliation bill the ability to defund the CFPB and place their funding underneath that of Congress."
Industry observers said putting the agency on appropriations would limit what it could do.
"If you cut the CFPB's budget by half, or a lot, you can essentially starve the agency or the threat of it would slow them down," said Richard Eckman, a partner at Pepper Hamilton.
The CFPB currently is funded through quarterly requests to the Federal Reserve. Its 2017 fiscal budget is $636 million.
Republicans have also threatened to use the Congressional Review Act to overturn any new agency rules. That law allows Congress to review any rule promulgated by an agency within the past 60 legislative calendar days, and a vote is also not subject to Senate filibuster.
As a result, it is likely to hamper the CFPB's ability to issue new rules, particularly on mandatory arbitration clauses, which the agency has proposed reining in.
New executive orders from President Trump could also delay the agency. The president is requiring that every agency create a task force focused on eliminating regulations that are unnecessary, burdensome and harmful to the economy. Another executive order would require that two federal regulations be eliminated for every new one created. Neither executive order is legally binding against the CFPB, but independent agencies generally try to comply with new orders nevertheless.
"The CFPB is in a bind because the executive orders reducing regulations and controlling regulatory costs are going to constrain their business model," said Anthony Gibbs, a managing director at Alvarez & Marsal.
Ultimately, of course, Republicans want a more comprehensive approach to the CFPB, one that would severely undercut the agency. A draft memo from Hensarling called for effectively gutting the CFPB of its enforcement powers, including stripping it of the ability to take action against unfair, deceptive or abusive acts.
But a vote on an updated version of the Financial Choice Act
Colgate Selden, a partner at Alston & Bird and a former senior counsel in the CFPB's Office of Regulations, said some banks and financial firms do not support the Financial Choice Act, but they do want an agency that is more business friendly.
"Certainly there are some people out there who would love to get rid of the CFPB, but most industry people don't want the CFPB to go anywhere, and some actually like it because it has created prudential and compliance safety for them," Selden said. "The only thing most everyone in industry doesn't like is the enforcement side of the house. They generally like the regulations that have come out — they have faults with some and want them to be tweaked — but in terms of getting rid of the bureau and the regulations, nobody interested in broad market sustainability wants that."
Republicans have long criticized the CFPB's structure and have called for a five-member commission to replace the agency's single director. But House Republicans abandoned that idea in their proposed revisions of the Choice Act.
Luetkemeyer acknowledged that the revised bill, which is expected to be introduced soon, "set the bar pretty high," as a negotiating tactic.
"What's going to happen here is the bill goes to the Senate and a compromise is for it to go to a commission," he said.
