Five ways financial laws could change in 2018

Republicans have made limited progress on President Trump’s pledge to “dismantle” the Dodd-Frank Act, which the GOP had hoped to gut by the end of 2017. But the GOP and independent regulators could still make critical changes to key parts of the law’s legacy.

With a conservative new director for the consumer protection bureau, bipartisan interest in amending parts of Dodd-Frank and the GOP focused on pulling back a few key rules, here are five ways finance laws could change in 2018.

Mulvaney’s impact on the Consumer Financial Protection Bureau

Office of Budget and Management Director Mick Mulvaney has made sweeping changes as the acting chief of the Consumer Financial Protection Bureau (CFPB), a once-aggressive watchdog created under Dodd-Frank. Appointed by President Trump in November to rein in the agency long loathed by the GOP and finance industry, Mulvaney has steered the agency towards deregulation.

Mulvaney said in November that he is “going to try and limit as much as we can what the CFPB does to sort of interfere with capitalism and with the financial services market.”

{mosads}Banks and others in the financial services sector are eager for a new start with the CFPB, and Mulvaney is delivering.

The CFPB announced last week that it will reconsider the rule on prepaid cards and debit accounts issued by former Director Richard Cordray, and ease reporting requirements from its mortgage disclosure rule. The bureau is also reconsidering several lawsuits and enforcement actions initiated by Cordray. 

Mulvaney has also announced plans to hire political aides to help reshape the agency that Democrats designed to be independent of White House and congressional influence. His stint as acting director could transform a key, controversial product of Dodd-Frank.

The bipartisan Senate bill to roll back Dodd-Frank

Senate Majority Leader Mitch McConnell (R-Ky.) told reporters last week that he’d like to hold a vote on a bipartisan Senate Banking Committee bill to exempt small and mid-size banks from aspects of Dodd-Frank.

The bill from Senate Banking Committee Chairman Mike Crapo (R-Idaho) has more than enough bipartisan support to clear the upper chamber. But House Republicans have called the bill a non-starter that doesn’t go far enough to rein in Dodd-Frank or the CFPB.

The Senate bill exempts small and mid-size banks from the most stringent parts of Dodd-Frank and scales back federal oversight of the financial system on the whole. But it also includes no structural changes to the CFPB, which Democrats have fiercely opposed.

If the bill fails in the House, some Republicans in both chambers may try to salvage parts of it with wide bipartisan support to pass as stand-alone bills. Those areas likely include the process regulators use to judge a bank’s risk and mortgage disclosure requirements. 

Repeal of the CFPB payday lending rule

House members from both parties have lined up behind a Congressional Review Act resolution to repeal the CFPB’s October rule on high-interest, short-term loans. 

Repealing the bureau’s rule, which was meant to protect consumers from cyclical debt to payday and car title lenders, seemed too toxic for the CFPB’s critics to touch. But their successful repeal of the bureau’s forced arbitration rule in November inspired an attempt to revoke CFPB lending and debt collection restrictions. 

Republicans and a slew of Democrats from Florida — a payday lending hotbed — have sponsored a CRA resolution to repeal the rule.

That bill would likely pass the House along party lines, but could face trouble in the Senate. The GOP will only have a one-seat majority when Sen.-elect Doug Jones (D-Ala.) joins the chamber, and Sens. John Kennedy (R-La.) and Lindsey Graham (R-S.C.) voted with Democrats to save the CFPB arbitration rule.

Tinkering with the Volcker Rule

Banks have complained for years that a Dodd-Frank rule banning them from investing their own capital in certain risky assets is unclear and hard to follow. The so-called “Volcker” Rule, named after former Federal Reserve Chairman Paul Volcker, has long been a target of Republicans and the financial sector.

Comptroller of the Currency Joseph Otting, a former bank CEO, said that his agency would consider ways to make the rule clearer and less costly to comply with for smaller banks. Republicans and some moderate Democrats also support exempting community banks and credit unions from the rule altogether.

Action on credit reporting agencies

Congress fumed in September when credit rating agency Equifax announced that hackers exploited a software flaw to access the personal information of more than 144 million customers. Lawmakers from both parties demanded to know how such a massive breach of personal information could happen, and why it took executives three months to disclose it. 

Cyber breaches of financial companies reach across several committees of jurisdiction, and senators on the Banking Committee have expressed interest in a bill meant to protect credit-reporting information.

During the Banking panel’s markup of bipartisan Dodd-Frank rollback bill, Sen. Brian Schatz (D-Hawaii) sought to add language meant to boost accountability and transparency when credit reporting agencies are breached. 

Kennedy, the Louisiana Republican who voted to protect the CFPB arbitration rule, expressed interest in working with Schatz on the issue, and Crapo said the committee could explore that in future.