When the CFPB director stepped down, it caused a mess that resulted in lawsuits and two directors showing up to work on the same day. Needless to say, there was a bit of chaos. Who would have thought that the turmoil caused from the changing of the guard would create bipartisan support in both the House and Senate? Congress had trouble agreeing on a solution to keep the lights on, but two different pieces of legislation yesterday saw signs of movement that could be a sign of the two sides coming together.
The Senate passed a bill yesterday to roll back regulations put in place when Dodd-Frank was passed in 2010. The new bill will allow local banks and credit unions to expand lending in their communities and offer more products to consumers. Larger banks were not forgotten in the new bill as it increases the threshold from $50 billion to $250 billion for banks that are considered “too big to fail”. These larger banks must go through a yearly stress test to prove that they could survive another market collapse, but the new bill increases the threshold, allowing more banks to avoid extra regulations. Some are concerned that the reduced regulations may weaken the CFPB’s ability to enforce fair lending regulations since the bill makes local banks and credit unions exempt from HMDA reporting. Under the bill, banks with assets of less than $10 billion would not be required to report who they lend to and may open the door for discrimination or predatory lending.
Four congress members introduced the Financial Product Safety Commission Act of 2018 yesterday which would remove the CFPB director and replace them with a bipartisan commission. The commission would have members from both political parties and prevents any party from having more than three members at a time, ensuring bipartisan input at the helm of the CFPB. Implementing a commission as the head of the CFPB would remove the turmoil that was caused with the most recent snafu and allow more debate from both parties. The commission would have a rotating schedule of members who serve five-year terms and would initially stagger the terms of the members to allow for turnover in the beginning stages of the plan. Kyrsten Sinema (D-Arizona and sponsoring member of the bill) said that the direction of the CFPB is currently “subject to the whims” of whichever party is currently in control. The new structure would allow more stability at the CFPB and make transition between Administrations smoother.
I can only hope that these two new bills are the first of many bipartisan bills that make Congress work together to help the people who put them in office. If either of these bills pass, they would mark the first bipartisan bill of the Trump Administration (not counting spending bills that must be passed) and that can only be a positive sign for the country. We don’t want to slip into the same problems we had that caused the crash in the early 2000’s but also want to make sure we can get borrowers a loan that works for them. All these regulations boil down to the consumer and making sure they are fully aware of what they are agreeing to. Hopefully, both sides of Congress can come together to make things better for the consumer and drop their focus on the banks.
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.