Obama, Republicans, in Legislative Tug-of-War Over Over CFPB Reform

On this side, Republicans in Congress, with an eye on dismantling the Consumer Financial Protection Bureau.

On this side, President Barack Obama, who has stated that he will veto any bill “to unravel Wall Street reform.”

These comments happened Thursday, in Birmingham, Alabama, during a speech focused on the economy. Obama sees Republican pushes to dismantle the CFPB as an attack on working class families and tax payers. “The Republican budget would make it harder for the CFPB to do its job, and allow Wall Street to go back to the kind of recklessness that led to the crisis in the first place,” he said.

Republicans have always seen the CFPB as a challenge to the free market. In their economic view, banks should be free to decide to lend money to people based on credit instead of government mandates.

Collection agencies have seen the CFPB as an opaque Magic 8 Ball, with no clear direction or guidance for those working in the accounts receivable management space.

We can expect to hear more rhetoric from both sides in the ramp-up to the 2016 presidential elections. Democrats will want to focus the conversation on consumer protections — from reforms in debt collection to reforms in lending (specifically, yesterday’s story about payday lending). Republicans will focus largely on what they see as a regulatory body with no supervision, and will likely frame the conversation in terms of a need for smaller government. (Texas Representative Randy Neugebauer would accomplish this smaller government by replacing Richard Cordray with a five-person bipartisan committee.)

Republicans will also attempt to direct attention to those whom they feel need protection: “Main Street” financial institution. Using language usually reserved for liberal ecologists, House Financial Services Committee Chairman Jeb Hensarling said, “It is not an exaggeration to say that community banks and credit unions are withering on the vine. We are losing, on average, more than one a day and they are not perishing of natural causes. The sheer weight, volume, cost, complexity, and uncertainty of federal regulation is a burden that is killing them off. And as they die, unfortunately, so do the dreams of millions of our fellow citizens who rely upon these community financial institutions to achieve their American dream of financial independence.”

Neugebauer sees these financial reforms as a necessary corrective: Today, the Financial Services Committee has begun to move the pendulum closer to the direction of reasonable regulation by taking the first step to address much-needed regulatory relief for our Main Street financial institutions and the consumers they serve.”

The answer is no doubt somewhere in the middle. Good luck finding where that is.