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The House just passed the CHOICE Act, which could hurt students with loans

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Update 4:51 p.m.

The House passed the Financial CHOICE Act, a sweeping roll back of Dodd-Frank banking regulations on Thursday.

The controversial bill passed by a vote of 232-186 along party lines and will now go to the Senate, where it is expected to go through lots of revisions. 

The House just passed the CHOICE Act, which could hurt students with loans

WATCH | The House is set to vote on the Financial CHOICE Act, a bill to de-regulate the banking industry and roll back restrictions under Dodd-Frank. But some are worried that the bill will hurt consumers -- especially young people -- and put the financial market on shaky ground. 

Republicans celebrated the passage of the bill in the House Thursday.

What is the CFPB?

The Consumer Financial Protection Bureau is essentially a watchdog for banks and other financial institutions. It makes sure lenders, creditors, etc. are treating consumers fairly. 

It's the brainchild of Sen. Elizabeth Warren (D-MA) and was created within the Dodd-Frank Act after the 2007 financial crisis. 

The CFPB also produces reports and research to help Americans navigate the financial industry and better understand banking, credit cards, loans, etc. 

Experts say the CFPB is particularly helpful for students paying off college loans. 

"You might have to reschedule payments because you've hit hard times or just get somebody on the phone to explain exactly how this is unfolding. The Consumer Financial Protection Bureau is the agency that looks out and makes sure that student loans servicers are doing that for you," said Carter Dougherty, a spokesman for progressive nonprofit Americans for Financial Reform.


Why is it in danger?

The CHOICE Act effectively strips away the CFPB's enforcement and regulatory authority. 

The bill would also allow the president to fire the CFPB director at any point and put funding for the agency in the hands of Congress, which means a Republican-controlled Congress could choose to gut the agency. 

Rolling back Dodd-Frank

After the financial crisis, lawmakers passed the Dodd-Frank Act, which established banking regulations and oversight procedures and created mechanisms to help prevent another banking meltdown. 

Supporters of the bill have argued that while some regulations are needed, Dodd-Frank did more to hurt small banks than it did to reign in Wall Street. 


"It was cobbled together in a great fury, it was a kind of special interest feeding frenzy. It gives the appearance of tackling problems that were behind the crisis but it actually left many of the causes of that crisis completely untouched," said George Selgin, director of the Center for Monetary and Financial Alternatives at the Cato Institute. 

Republicans argue that Dodd-Frank's regulations are too burdensome for small banks and have made it difficult for banks to give loans to small-businesses and families.

“This is a jobs bill for Main Street," House Speaker Paul Ryan (R-WI) said Wednesday. "The Financial CHOICE Act makes it possible for small businesses across this country to stop struggling and to start hiring.”

Dougherty says he's not buying that. 

"It is hard to find a bigger piece of nonsense in the talking points about the Financial CHOICE Act than this particular notion that this is all done behalf of Main Street and small banks," he said. 


He argues that the legislation rolls back regulations that specifically target big banks, like the Volcker rule, which was designed to prevent big banks from engaging in the kind of speculative lending that led to the financial crisis. 

At an April House Financial Services Committee hearing, Warren called the bill "a 589-page insult to working families" and questioned why President Trump, who has pledged to be tough on Wall Street, would support it. 

Ryan on Wednesday called the bill the "crown jewel" in the Republican deregulatory agenda. 

Selgin said the bill would boost the economy, lifting regulatory burden off smaller banks. 

"It’s going to make it easier for people to get loans that have been hard to get in recent years. It's going to matter more for younger people that are trying to go in to business," he said. "In the end, everybody gains, young and old alike from economic growth." 


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