While the media was absorbed with the testimony of former FBI Director James Comey two weeks ago, the Republican House passed a troubling piece of legislation that affects everyone. A cynical bill cleverly titled the Financial CHOICE Act passed entirely along party lines with not one Democrat in favor. CHOICE (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs) is a deregulation bill to repeal the 2010 Dodd Frank Act.
The Dodd Frank Act prevents banks from engaging in risky trading behaviors using clients’ deposits. The measure established the Consumer Financial Protection Bureau (CFPB) to protect consumers from financial scams. It prevents banks from using clients’ deposits in risky trading and also grants authority to the Federal Deposit Insurance Corporation to quickly and safely dismantle bankrupt financial institutions. Already, the CFPB has provided $11.8 billion in relief to over 29 million consumers from their enforcement actions, help that would be challenging to find should Congress dismantle the bureau.
President Donald J. Trump, among others, says that Dodd Frank imposes too many complex rules on financial institutions and costs banks too much money. The proposed CHOICE Act appeals to Wall Street interests because it guts the CFPB, eliminates ways to close struggling banks outside of bankruptcy court and removes regulations on “too-big-to-fail” companies and limits access to information for consumers who attempt to make educated choices. This gives big banks advantages over consumers.
In practice, the Financial CHOICE Act opens the market up to the same risky practices that caused the 2008 recession. It erases necessary enforcements that ensure banks prioritize the interest of the consumer over short-term profit made through speculative trading.
Right now, the CHOICE act remains symbolic. With no Democratic support in the Senate, it cannot be enacted. Those close to the debate believe the bill was never expected to pass without bipartisan support.
But Dodd Frank remains in jeopardy. Republican senators have a good chance of passing smaller changes in the future and they can also pressure regulators. The language of the act gives regulators a great deal of power to determine how the rules are enforced. With the Trump administration bent against Dodd Frank it is likely they will seek to weaken the regulations in the near future.
The CHOICE Act actions in the House and the Senate attempt to take away consumer protections. Contact your representatives to be sure they know where you stand.
Selena West is an intern at the Office of the Community Lawyer. She is a senior at New York University. Cady Stanton is an intern at the Office of the Community Lawyer. She is a sophomore at Georgetown University.
