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House Passes CHOICE Act In Move To Roll Back Consumer Financial Protections

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The House of Representatives voted today to pass the Financial CHOICE Act, a piece of legislation that, if enacted, would strip away a number of consumer protections put in place following the devastating collapse of the housing market.

On a largely party-line vote, the CHOICE Act was approved by the House with a vote of 233 to 186. Rep. Walter Jones of North Carolina was the only GOP lawmaker to break ranks to vote against the bill; no Democrats voted for the Act.

The CHOICE Act seeks to repeal many of the banking and investment regulations put in place by the 2010 Dodd-Frank financial reforms, most notably the creation of the Consumer Financial Protection Bureau.

The CFPB was tasked with curbing deceptive and unfair business practices in the banking, lending, and credit industries. It has returned around $12 billion to consumers since its inception, but it’s also been a favorite target of financial institutions who claim that the Bureau has too much authority and is not accountable to Congress.

Rep. Jeb Hensarling (TX), who received $1.2 million from the financial services sector and was the second-largest recipient of donations from commercial banks, introduced the CHOICE Act in February, proposing to gut the CFPB in numerous ways.

READ MORE: Bank-Backed Congressman Introducing Law To Gut Consumer Financial Protections

The bill, if passed, would limit the CFPB’s ability to regulate nonbank financial companies like credit reporting agencies, debt collectors, student loan servicers, and auto finance lenders. In just the last few months, the Bureau has sued student loan servicing giant Navient, misleading debt collection firms, and a legal fund accused of scamming 9/11 first responders.

The CHOICE Act would also prevent the CFPB from moving forward with its ongoing plan — as required by the Dodd-Frank laws — to regulate and rein in often-predatory lending products like payday and auto-title loans.

READ MORE: ‘Financial Choice Act 2.0’ Would Eliminate Government’s Ability To Go After Shady Payday Loan Operations

The CFPB is also in the process of issuing new rules intended to limit the use of forced arbitration clauses that strip customers of their right to sue banks, credit cards, and others. The CHOICE Act would grind that process to a halt, effectively guaranteeing that most Americans will never have the opportunity to sue when their bank, for example, spends more than a decade doing nothing to stop employees from opening millions of fraudulent accounts in customers’ names.

Not only would the CHOICE Act put the CFPB’s funding — which is currently provided outside of the normal appropriations process — under the thumb of Congress, but the Bureau would need to get congressional approval before taking enforcement action against financial institutions.

The CFPB has multiple complaint portals available to the public — for things like credit cards, auto loans, mortgages, and bank accounts — and it attempts to hold these industries accountable by making information about these complaints public. However, the CHOICE Act would hide all of this data behind a wall of anonymity, meaning the public no longer knows which financial companies are repeatedly being called out by their customers.

Thanks to the public nature of these complaints, a recent report found that a large share of debt collection complaints involved military servicemembers. Additionally, the Bureau has taken multiple actions to protect the finances of members of the armed forces, like requiring an Ohio auto lender to return nearly $3 million to servicemembers who were harmed by questionable debt-collection practices.

READ MORE: Financial CHOICE Act Would Harm Servicemembers

Inexplicably, the CHOICE Act would also bar the CFPB from conducting education campaigns to inform consumers about their rights in financial dealings like mortgages and student loans.

An amendment tacked on by Rep. Ken Buck (CO) would direct the Government Services Administration to determine if the CFPB should remain in its current office, or if the Bureau would have to sell off its headquarters and move into a more modest office.

READ MORE: AGs Blast Financial CHOICE Act, Urge Congress To Reject Proposed Bill

In addition to its impact on the CFPB, the CHOICE Act would gut other regulations intended to protect Americans and require transparency from the financial sector.

The Act would repeal the Volcker Rule, a portion of the Dodd-Frank reforms that restricts banks’ ability to make speculative deals that don’t benefit their customers.

The so-called Fiduciary Rule, which aims to stop investment advisors from pushing customers into products that primarily benefit the advisor, would also be repealed by the CHOICE Act. The Trump administration recently allowed the Fiduciary Rule to move forward, but indicated that it may not actually enforce it.

The CHOICE Act now heads to the Senate, where it’s not expected to garner the 60 votes needed to make its way to the President. Senate Republicans are reportedly working on their own, less-sweeping financial reforms.

Consumer advocates were displeased by today’s vote.

“Supporters of this misguided legislation appear to have forgotten how weak consumer protections helped trigger the financial crisis that cratered our economy and hurt millions of Americans,” said Pamela Banks, senior counsel for our colleagues at Consumers Union. “This bill cripples the CFPB’s ability to stand up to the big banks and predatory lenders and puts hardworking families at risk of losing their money to unfair financial practices.”

Ed Mierzwinski, Consumer Program Director at the U.S. Public Interest Research Group, says the CHOICE Act “would leave the successful CFPB as an unrecognizable husk incapable of doing its job to protect consumers, homeowners, older Americans, students, servicemembers and veterans… What could possibly go wrong if Wall Street banks and predatory payday lenders are allowed to run amok again?”

Even though GOP lawmakers repeatedly claimed that big banks were against the CHOICE Act, today’s vote has been praised by the American Bankers Association, which lobbies on behalf of banks large and small.

“Today’s House vote is an important step toward making much-needed regulatory reforms that will allow banks to better serve their customers and communities,” writes the ABA. “We applaud Chairman Hensarling and members of the House Financial Services Committee for their continuing efforts to fix financial rules that are holding back the U.S. economy, and doing little to enhance safety and soundness.”

What the ABA forgets to mention is that, it contributed more than $2.3 million to federal candidates in the last election cycle, including $462,000 just to members of the House Financial Services Committee, which introduced this bill in the first place.

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