The first 100 days of the Trump administration have had no shortage of broken promises to American workers and families. But the president’s troubling promise “to do ‘a big number’” on Dodd-Frank—the financial reform law passed in 2010—may actually be kept. Congress takes a big step toward that goal this week when the House Financial Services Committee votes on the Financial CHOICE Act, committee Chairman Jeb Hensarling’s (R-TX) bill that would largely undo financial reform. The sweeping, 593-page bill would take a wrecking ball to financial reform, undermining tools that regulators use to safeguard the financial system and decimating key consumer and investor protections.
The CHOICE Act—short for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs—should it move forward, is yet another action by this administration and Congress geared toward helping corporations and the wealthy. It runs contrary to voters’ support of strong accountability for the financial sector and of various consumer protections that the bill would eliminate.
Most voters believe we have too little financial regulation, not too much
Americans overwhelmingly support stronger accountability for the financial sector. A poll of 1,000 likely voters conducted last June found that 82 percent of Democrats and 66 percent of Republicans surveyed believe that “Wall Street financial companies [should] be held accountable with tougher rules and enforcement.” In the same poll, 59 percent of all Americans surveyed feel that “Wall Street and the financial industry are … still engaged in reckless practices that pose a continuing threat to the economy,” including 69 percent of Democrats and 48 percent of Republicans. Three-quarters support existing Wall Street reform efforts overall.
This support extends to the Consumer Financial Protection Bureau, or CFPB, a new agency created by Congress in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In its short history, the CFPB has returned nearly $12 billion to 29 million Americans who were victims of harmful financial practices, and has handled more than 1.1 million complaints by members of the public against banks, credit reporting agencies, and other financial companies. It has also made important strides in ensuring a fair financial marketplace for communities of color and fighting against LGBT discrimination in lending. The June poll finds that 8 in 10 Democrats, and nearly 6 in 10 Republicans, support the mission of the agency when it is presented to them. And when presented with arguments for and against the CFPB, 79 percent of Democrats and 46 percent of Republicans agree with the need for regulations against unsafe financial products rather than arguing, “The CFPB is another unaccountable, expensive, federal bureaucracy we don’t need.” Meanwhile, Chairman Hensarling has considered the CFPB to be “totally unaccountable” and “a rogue agency,” and the CHOICE Act would strip the agency of most of its power.
While Democrats are somewhat more likely than Republicans to argue that the financial sector needs more regulation, Trump voters as a whole also support these regulations. A December 2016 Glover Park Group/Morning Consult poll of self-identified Trump voters found that only about one in five of those surveyed felt there was too much government regulation of Wall Street or large banks—and about one-third felt that these companies actually did not have enough regulation. Fifty-five percent wanted the CFPB to either have its power expanded or for the agency to be left alone, and 50 percent said the same about the U.S. Securities and Exchange Commission.
Most voters support specific consumer and investor protections that the CHOICE Act would take away
The CHOICE Act would impose sweeping changes on financial regulation, but several of its provisions target specific protections that voters largely value.
Last year, the CFPB proposed a rule to regulate payday and car title loans that prey on vulnerable borrowers, leaving them with expensive credit that they have enormous difficulty paying back. The CHOICE Act would block the CFPB from ever addressing this issue. Yet when 800 voters were asked about payday lending last May, 71 percent of voters stated there should be additional regulation, including 82 percent of Democrats and 63 percent of Republicans. And 74 percent of former payday loan recipients or their families and friends also support the CFPB’s rulemaking. This is consistent with voters’ opposition to payday lending at the polls. Most recently, 76 percent of South Dakotans voted in 2016 to impose an interest rate cap to combat these loans, despite a confusing ballot initiative process.
The CFPB is also finalizing a rule to regulate the use of mandatory consumer arbitration clauses in financial product contracts that would be blocked by the CHOICE Act. Many contracts, whether for a bank account, a cell phone, or even a Snuggie, contain language that prohibits individuals from taking a company to court and instead requires that any disputes be handled through a private process known as arbitration. The vast majority of likely voters surveyed in July 2015 by Lake Research Partners support bank customers’ “right to take complaints to court,” including 80 percent of Democrats and 70 percent of Republicans, with 60 percent of Democrats and 55 percent of Republicans expressing strong support.
The CHOICE Act would also eliminate the U.S. Department of Labor’s fiduciary rule, a rule finalized last April after a six-year process that requires all financial advisers to act in the best interest of their clients. The rule, which the Trump administration already delayed, closes a loophole that allows professionals to give sales pitches that are presented as impartial financial advice. Keeping this loophole open costs savers and retirees $17 billion per year in higher fees and lower returns. Earlier this year, 93 percent of Americans surveyed by investment firm Financial Engines stated that they consider it important for all retirement financial advisers to be legally required to put their clients’ best interest first, and more than half incorrectly reported that this legal obligation already exists. And 65 percent of Trump voters surveyed last December stated that this rule should stay in place.
The CHOICE Act would have devastating effects on regulators’ ability to prevent and address future financial crises, and it would weaken protections for American families in the marketplace. Few voters actually want to turn back the clock and open the door to dangerous and predatory financial practices. This raises the question of who is actually in favor of rolling back these regulations. With approximately $2.7 million per day in lobbying and campaign contributions from financial interests during the past congressional cycle, it’s worth asking members who they will listen to when it comes to undoing financial reform: special interests or their voters.
Joe Valenti is the Director of Consumer Finance at the Center for American Progress.