The Trump administration has done its best to neuter the Consumer Financial Protection Bureau, giving large banks a reprieve from aggressive enforcement and new rules. With Joe Biden ascending to the White House, Wall Street is worried it will be quickly resurrected.

Thanks to a U.S. Supreme Court decision earlier this year, Biden will be able to fire Kathy Kraninger, the watchdog’s Republican director, even though her term isn’t complete—a move likely to happen in the weeks after the inauguration. The banking industry has reason to fear that a new chief will return the agency to its days of meting out stiff sanctions on lenders and credit card companies.

“Banks should be prepared for more aggressive enforcement and an expansion of the CFPB’s authority through its rulemakings,” said Rachel Rodman, a former CFPB lawyer who now represents banks as a partner at Cadwalader, Wickersham & Taft LLP in Washington. She expects the agency to be “more likely to bring an enforcement action, pursue novel legal theories and more likely to demand higher penalties.”

The regulator’s shift under President Donald Trump has been stunning. Since his appointees took over the CFPB in late 2017 it has imposed just a single fine on one of the nation’s six largest banks—a $500 million penalty against scandal-ridden Wells Fargo & Co. for allegedly overcharging auto lending and mortgage customers. When Barack Obama’s director ran the CFPB, it routinely punished mega-banks.

Biden’s short-list of potential CFPB leaders, according to people familiar with the matter, includes Federal Trade Commission member Rohit Chopra and Representative Katie Porter, a California Democrat known for sparring with JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon and other top bankers at tense congressional hearings. Both Chopra and Porter are supported by progressive Democrats and are acolytes of Senator Elizabeth Warren, who conceived of the CFPB and is determined to bring it out of its slumber.

A spokesman for the Biden transition didn’t respond to a request for comment.

Consequential Choice
The choice of who will run the CFPB is consequential since the watchdog was set up to avoid much of the political infighting that lobbyists often exploit to slow down policy changes and investigations. Unlike most federal agencies, the CFPB is run by a single director who not only controls the regulator’s agenda but also can set its budget without congressional approval.

That expansive power is what Democrats and consumer advocates are counting on to bring tough oversight to the financial industry, including mortgage lending, credit cards and bank overdraft charges. They also see the agency as playing a central role in the
Biden administration’s efforts to tackle the nation’s economic troubles brought on by coronavirus: monitoring federal aid programs, helping to stem foreclosures and ensuring fair loan terms for small businesses on the verge of collapse.

“The CFPB has so many tools that it isn’t using right now,” said Linda Jun, senior policy counsel at Americans for Financial Reform, a non-profit coalition that includes consumer, investor and labor groups. “If you get the right leadership in place, there is a lot that can be turned around.”

Supporters say one immediate area for a revamp is the CFPB’s supervision and enforcement program, which has endured a staff exodus. Even the Wells Fargo settlement, its most prominent case in the Trump era, seemed a reaction to the president. It was wrapped up after he personally tweeted that the sanctions would be “severe.”

Mulvaney’s Pledge
The CFPB was created as part of the 2010 Dodd-Frank Act. Its job overseeing the parts of the financial industry that interact with regular people proved popular with many Americans. But the bureau also became one of the most politically contentious aspects of the financial crisis-era law.

The Trump administration was determined to end what it saw as years of Democratic over-regulation and activism at the CFPB. After former Congressman Mick Mulvaney became the first Republican to run the CFPB in November 2017, he declared: “The days of aggressively pushing the envelope are over.”

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