House Passes the Financial Choice Act to Gut Dodd-Frank

House Republicans passed the Financial Choice Act on Thursday, legislation that would strip Dodd-Frank’s too-big-to-fail policy and curtail the Consumer Financial Protection Bureau (CFPB).

The Financial Choice Act will restructure the Consumer Financial Protection Bureau, a spawn of the Dodd-Frank financial overhaul passed by Democrats in the wake of the financial crisis. Instead of protecting consumers, the bureau slapped community banks with 17 million hours of paperwork requirements and almost $3 billion in regulatory costs.

The Federal Reserve, not Congress, funds the CFPB, making congressional oversight via the funding process difficult.

The CFPB’s director, Richard Cordray, once fined PHH Mortgage $109 million, instead of the $6 million recommended by the bureau’s own administrative law judge.

The Choice Act will restructure the CFPB’s single independent, unaccountable, director to a director that serves at the pleasure of the president and is subject to removal. The CFPB would be renamed the Consumer Law Enforcement Agency (CLEA) and will be subject to oversight via the appropriations process. House Republicans would also reform the CFPB to enforce financial consumer laws that currently remain on the books, instead of creating onerous regulations ad hoc. In effect, the CFPB would work in a similar fashion to the Federal Trade Commission (FTC).

Under Dodd-Frank, federal regulators can label large financial organizations Systemically Important Financial Institutions (SIFIs) that would subject banks to stricter regulations and potentially rescue Wall Street banks through taxpayer-funded bailouts.

The Choice Act would also subject financial agencies to the REINS Act, that would allow Congress to disapprove of major regulations that cost $100 million or more in economic impact. According to the American Action Forum, applying REINS to financial regulatory bodies would save more than $27 billion in annual regulatory costs and 11.5 million paperwork burden hours.

The bill would also repeal the Department of Labor’s Fiduciary Rule, a rule that stops consumers from receiving investment advice customized to their individual preferences. According to some estimates, the Fiduciary rule could double retirement savers’ cost.

The Congressional Budget Office estimates that the bill will reduce the deficit by $25 billion.

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