Compliance Insider: Post-Election Musing

They say elections have consequences, and by all accounts, the 2018 midterms were definitely consequential. As of this writing, the Democrats have flipped 33 seats to take control of the House, effectively quashing President Donald Trump’s hopes of pushing through his legislative agenda. Republicans appear to have increased their Senate majority by two seats but are still well short of the 60 votes necessary to move legislation forward. A divided Congress does not bode well for new financial services legislation.

Rep. Maxine Waters (D-Calif.) will be the chair of the House Financial Services Committee and is already considering legislation to undo some of the
structural changes Bureau of Consumer Financial Protection Acting Director Mick Mulvaney has made at the agency, including the reorganization of the Office of Fair Lending. One imagines that Kathleen Kraninger, who was confirmed as the new BCFP director during the lame-duck session of Congress, will be asked to testify before the committee numerous times on matters great and small. It will be interesting to see if Director Kraninger is as recalcitrant with Democratic committee members as former Director Richard Cordray was with Republican members of the committee.

But what is likely to change? Probably, not much. Legislation produced by the Financial Services Committee will almost certainly be approved by the full House, albeit likely along party lines. But such legislation’s fate in the Senate is likely to be far less rosy. Democrats will have to vote in a block and wrangle at least 13 Republican votes to move legislation forward. Assuming they can do that, the White House will remain a roadblock as President Trump is at best a wildcard. In a rational world, I’d put him in the “no” column but, like many, I’ve discovered predicting his actions to be a futile exercise. Still, all things being equal, Democrats are going to have a very tough row to hoe to advance any new financial services legislation.

Might we see bipartisan legislation to convert the BCFP to a commission? All indicators point to bipartisan support for this change, but in the past two years, the Republicans were in no hurry to move forward. Instead, they used their majority to defang the BCFP and support the rollback of some of Cordray’s initiatives. Both sides of the aisle recognize the value of a stable and relatively predictable BCFP, but apparently, neither side can resist playing politics with the agency. Rep. Waters should really consider bringing up this legislation in the near-term to establish an environment of bipartisanship on the committee. There is no question there will be many other activities of the committee that are controversial — not the least of which would be to launch investigations of the president — but quickly doing something both sides can agree on would help set a productive tone for the next two years.

In my view, the congressional outlook through 2020 is rocky, at best. The acrimony between Democrats and the President will continue, but will be turbocharged. There will be plenty of investigations, accusations, and insinuations, some designed to uncover the facts and others designed to simply tweak the emotions of the parties involved. Often, a divided Congress gives rise to ludicrous legislation, because all parties understand it won’t go anywhere. But it’s an effective way to make a political point. Many of us in the real world see that as a waste of time, energy, and resources, and too often our elected representatives can’t help themselves. But that’s the silver lining. A divided Congress rarely does harm.

While it’s probably too much to hope for, a spirit of bipartisanship and a concerted effort to pass bipartisan legislation would serve the House Financial Services Committee and the American people well. Perhaps the committee could identify those initiatives that both sides can support — as each side has identified those things they want to investigate — and prioritize them.

My suggestion? Start with converting the BCFP to the Consumer Financial Protection Commission. You’ll be glad you did.

Michael Benoit is chairman of Hudson Cook LLP and a partner in the firm’s Washington, D.C., office. Benoit is a frequent speaker and writer on a variety of consumer credit topics and can be reached at 202-327-9705 or mbenoit@hudco.com. Nothing in this article is legal advice and should not be taken as such. Please address all legal questions to your counsel.

Editor’s note: This story was originally featured in the December issue of Auto Finance News magazine, out now.