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Trump to the CFPB "You're Fired!"???

By Guest Contributor Tom Hudson

The question of the hour for BHPH and for independent dealers and the finance companies that buy their installment sale contracts is the effect of a Trump presidency on the business of selling cars on credit.  The short answer is that no one really knows, but that doesn't mean that speculation on the topic is necessarily blind.

Of course, I didn't predict a Trump win, so you might give some consideration to whether my thoughts are worth listening to.  I'll leave that one up to you.

With that in mind, here, in no particular order, are a few thoughts on the topic.
 
First, I don't think the CFPB will go away.  Even the House Republicans' proposal to restructure the CFPB doesn't call for abolishing it, but instead involves replacing the single director with a five person commission, bringing the Bureau's budget under congressional control and putting some restrictions on its rulemaking and guidance processes.  Elizabeth Warren would have pressed Clinton to veto that measure in a New York (or Massachusetts) minute.  With a Trump victory, the proposal has some legs.

Second, the proposed congressional limits on the CFPB won't repeal the laws and regulations that have been involved in nearly all of the Bureau's attacks on the car sales and financing business.  The Truth in Lending Act and Regulation Z, the Consumer Leasing Act and Regulation M, the Equal Credit Opportunity Act and Regulation B, the Fair Debt Collections Practices Act, the Fair Credit Reporting Act, the Gramm-Leach-Bliley Privacy Act and its regulations – laws that have been on the books in some cases for nearly 50 years – are not going to go away. 

These laws and regulations have formed the basis for nearly all of the CFPB's enforcement actions in the car finance space – the Bureau has been relying primarily on its enforcement authority and has not been issuing new regulations aimed at dealers.  All of these laws were enforced by other federal agencies before the CFPB was formed.  Even if the CFPB were to be abolished outright, the enforcement responsibility for these laws, and probably the personnel at the CFPB doing the enforcement work, almost certainly would be transferred back to the original agencies.

Third, even with the presidency and both houses of Congress in the hands of the Republicans, the Democrats are not powerless.  Senate rules call for a 60-vote majority before a vote can occur on most legislation.  The Republicans won't have those 60 votes, and you can count on the Democrats closing ranks to try to stop any of their number from supporting the other guys.  I'd like to be a fly on the wall listening to some Democratic senator explaining to Elizabeth Warren why he feels it is necessary for him to side with the Republicans.  We may see some legislation, but it will likely involve enough compromise to satisfy the minority.

Fourth, don't look for Trump to tell Director Cordray, “You're fired.”  The Dodd Frank Act established the Bureau with a single director who could not be fired other than for cause.  The opinion in the recent PHH case in effect changed that, holding that the Director serves at the pleasure of the President, and can be fired for any reason.  But Trump will get a serious fight if he tries to assert such power before the case has gone through the appellate process.  I doubt Trump wants to start his presidency by picking a high-profile fight with Cordray.  Even if he won the fight, the political payoff would, in my view, be negligible.  More downside than upside.

Fifth, remember that Trump claims, rather improbably, that he's for the little guy.  The Bureau's says its mission is to protect the little guy from the flim-flamming of rapacious creditors.  Is Trump going to take the “New Cop in Town” off the beat?  Unlikely, I think.
So, there's my two cents.  If I'm wrong, I'll cheerfully return your money.
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Tom (thudson@hudco.com) and Nikki (nmunro@hudco.com) are partners in the law firm of Hudson Cook, LLP. Tom has written several books and is the publisher of Spot Delivery®, a monthly legal newsletter for auto dealers. He is Editor in Chief of CARLAW®, a monthly report of legal developments for the auto finance and leasing industry. Nikki is a contributing author to the F&I Legal Desk Book and frequently writes for Spot Delivery. For information, visit www.counselorlibrary.com. Copyright CounselorLibrary.com 2016, all rights reserved. Single publication rights only, to the Association. (11/16). HC# 4815-3534-9052 v.1

Comments

 
By: Chantelle
On: 11/10/2016 19:28:40
Great points!!!! I think we will be much better off as an industry under Trump then what has happened the last 8 years. Can only get better!

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