I fretted a week into his presidency that Donald Trump was going to destroy the CFPB — one of the best things to come out of the Obama administration. (Better than Obamacare, which was honestly half-baked but way better than the status quo.)
In the past five years, the agency has saved consumers $12 billion from companies that ripped us off. Can you think of any part of the federal government that’s done more for people over that span?
But I’m less worried about the Consumer Financial Protection Bureau by the day, because this president just can’t get his act together. Instead of gutting the CFPB, I’ve mostly watched Trump destroy his reputation as a great businessman and manager. His administration is full of gaping holes from top to bottom. It’s only a quarter as staffed as Obama’s was at this point in 2009. So he has other priorities, including putting out fires he started himself.
Meanwhile, the warring Republican factions running Congress can’t sell anybody on a healthcare plan they had seven years to write. Of course, it’s business getting things done as usual. Several banking groups, including mortgage servicer PHH, are still laser-focused on hamstringing the CFPB through the courts. They might not need Trump or a full Republican Congress to do anything.
Right now, a case that could determine the fate of the CFPB has a hearing on May 24. And, bizarrely, the Justice Department just signaled it is siding with PHH, something The Wall Street Journal notes has happened only “a few instances in recent decades.” Let’s recap what the case is about, and then I’ll explain why I’m not worried…
PHH: Making us pay fines for kickbacks is unconstitutional!
PHH is a mortgage lender. Over three years ago, the CFPB argued PHH had been violating real estate laws since 1995 by referring customers to insurers who gave kickbacks to PHH, and overcharging customers who didn’t buy the mortgage insurance.
Ultimately, the CFPB fined PHH $109 million — all the money it had allegedly received in kickbacks since 2008 — and PHH decided to go to court instead of paying up. As the case worked its way up the system, PHH’s argument morphed from “we don’t owe this money” to “the CFPB shouldn’t exist.”
The case wound up in the D.C. Court of Appeals last year, where a panel ruled 2-1 that the CFPB’s leadership structure was unconstitutional and the fine was invalid. Things looked kind of dicey, especially since Trump won the election and announced plans to deregulate.
It’s worth noting the CFPB actually didn’t start that fight — the Department of Housing and Urban Development did, years before. But its investigation wasn’t going anywhere and was handed over to the CFPB when the agency was formed in 2011. The CFPB just actually got something done, even if it took three years.
Anyway, the CFPB appealed that ruling. It wanted a chance to defend its constitutionality before the full Court of Appeals. The court in February said: Sure, see you in May.
Since then, several groups have piled on in the case against the CFPB: the U.S. Chamber of Commerce; several banking associations including the Mortgage Bankers Association, the American Financial Services Association, and ACA International (formerly known as the American Collectors Association); the libertarian thinktank The Cato Institute; and the attorneys general of 15 states, 13 of which are governed by Republicans. (But the other two are Louisiana and West Virginia.)
Finally, the federal Justice Department just jumped into the battle royale, announcing “the views of the United States on matters involving the president’s removal power [meaning CFPB Director Richard Cordray] are not always entirely congruent with the views of independent agencies.”
It’s not over yet
While it seems like the deck is increasingly stacked against the CFPB, I’m not terribly concerned it will be disappearing. It may somehow lose the case — hopefully not — but soldier on through the Trump administration. Why? Because Mark Calabria says so.
He’s the chief economist for VP Mike Pence — you know, the guy in the White House with some actual governing experience. He’s also the former director of regulation studies for the Cato Institute, the libertarian group that signed onto the PHH case. A couple weeks ago at the National Association for Business Economics, he told attendees: “You’re going to have to have a CFPB that actually goes after bad actors, rather than trying to make policy decisions that have nothing to do with bad actors.”
Odds are Calabria has very different ideas than I do about those policy decisions, but it doesn’t sound like he foresees the CFPB going away. In the worst-case scenario, it might be restructured in a way that neutralizes it for the duration of the Trump administration, similar to the EPA.
But Republicans won’t be in charge forever — maybe not even in two years, if the in-fighting over Obamacare is any indication.