Today, the House Appropriations Committee’s Subcommittee on Financial Services and General Government will mark up its draft fiscal year 2018 appropriations bill. The draft bill contains multiple provisions to reform the CFPB, which include:
- Bringing the CFPB into the regular appropriations process;
- Eliminating the CFPB’s supervisory authority;
- Removing the CFPB’s UDAAP authority;
- Repealing the CFPB’s authority to place restrictions on arbitration; and
- Creating an exemption from risk retention requirements for nonresidential mortgages.
Notably, the bill does not challenge the CFPB’S leadership structure. As reported in a blog post earlier this week, a group of financial trade associations had expressed support for including provisions in this appropriations bill that would reform the CFPB’s organizational structure, so that the CFPB would be controlled by a five person commission rather than a single director.
The legislative strategy of including CFPB reforms as a “policy rider” to appropriations bills has frequently been pursued by the House in prior years. For example:
- The FY2017 draft appropriations bill contained provisions requiring a commission structure; and
- The FY2016 draft appropriations bill contained provisions requiring the CFPB to be funded through the congressional appropriations process, rather than through transfers from the Federal Reserve as provided in the Dodd-Frank Act.
These CFPB reforms were never incorporated into any of the final appropriations bills enacted by the Congress. This may have been due to the fact that Senate Republicans do not have a strong enough majority to defeat a Democratic filibuster of CFPB reforms, although the Republicans have been the majority party since the 2014 elections. As the House appropriations bill moves forward, the CFPB provisions could be impacted by Republican efforts to reform the CFPB through the budget reconciliation process. For example, Republicans might attempt to use that process to defund the CFPB entirely by eliminating its funding from the Federal Reserve, while also avoiding a filibuster in the Senate.
Policy riders in appropriations bills typically influence agencies by directing how appropriated funds may be spent, such as a provision prohibiting the use of appropriated funds for a particular agency program. Because the CFPB is not dependent on appropriations to fund its programs, it is questionable to what extent congressional directives in an appropriations bill could result in the changes to the CFPB sought by Republicans. Even if the CFPB were dependent on the appropriations process, any CFPB reforms implemented through an appropriations bill could face legal challenges. Even the Supreme Court has concluded that the congressional “power of the purse” is not without limits. See e.g., South Dakota v. Dole, 483 U.S. 203 (1987).
UPDATE: The Subcommittee reported out the bill by voice vote for consideration by the full House Appropriations Committee.