So far in 2017, the Consumer Financial Protection Bureau has:
- fined credit bureaus TransUnion and Equifax $23 million for deceptive subscriptions
- forced medical debt collection lawyers to refund more than half a million dollars
- fined Citi $28.8 million and halted its foreclosure activity for mortgage trickery
- sued America’s largest student loan servicer, Navient (formerly Sallie Mae) for “cheating borrowers” out of an alleged $4 billion
Most of that money will go back to consumers the CFPB says were lied to, wrongly charged, or ripped off by complex paperwork. It just adds to the $12 billion the agency estimates it has returned to wronged consumers since 2011, either through compensation or forgiven debt.
There’s no federal agency pushing back harder against industry-created credit and debt problems. Since its creation over five years ago, the CFPB has created safer mortgage lending standards, clearer credit card disclosures, and hit nearly every corner of the financial industry for doing something shady. The CFPB, not the Better Business Bureau, has become the first stop for many frustrated consumers, The New York Times noted late last year.
The self-proclaimed “king of debt” Donald Trump wants to see the CFPB reined in. He’s already told business leaders he plans to cut federal regulations by “75 percent, maybe more.” His team has said dismantling the Affordable Care Act — Obamacare — and the Dodd-Frank Act, which created the CFPB, are top priorities. And with a Republican Congress, that’s no longer an idle threat.
Why Republicans hate the CFPB
Three main reasons.
First, it’s a consolidation of consumer protection powers — both rulemaking and enforcement — that used to be spread thin across seven other federal agencies. (Including some you probably never heard of like the “Office of Thrift Supervision.”) Once upon a time, Republicans said they didn’t like government waste and inefficiency, but now they seem more uncomfortable with an effective consumer advocate.
Second, it has an unusual power structure. Unlike other regulators such as the Federal Trade Commission or the Securities and Exchange Commission, which are led by small bipartisan groups, the CFPB is led by one guy: Richard Cordray, who has run the agency since it was created. This gets closer to the heart of it. Under President Obama, Republicans were unable to shape the new agency the way they wanted, and so far only a liberal lawyer has run the show. He’s been setting a pretty aggressive precedent, to the point that the official GOP platform actually calls the CFPB a “rogue agency.”
Third, the agency was mainly the idea of Democratic senator Elizabeth Warren — the champion of the fiery liberal wing of the party who treats Wall Street like a hostile foreign power. (Bernie Sanders doesn’t count, though he was happy to hold the Democratic banner just long enough to run for president.) Obama actually wanted her to run the agency, but Republicans successfully prevented that nomination in 2011. She’s been a bright blue thorn in Congress’ side ever since.
Of course, the reason Republicans say they hate the CFPB is because it’s actually hurting consumers by preventing job growth. If we only get rid of it — or gave them more direct oversight — the gates would open and jobs would rain down like manna from heaven. Weirdly enough, they said this about taxes and the ’90s deregulation that ultimately led to the Dodd-Frank Act, too.
What might happen next
In October, a federal appeals court found the structure of the CFPB unconstitutional. Until now, the law only allowed the director of the CFPB to be removed by the president “for cause.” The court says that needs to be changed to “at will.”
The CFPB is appealing the ruling, and probably would have been just fine if Trump hadn’t won. Now, it’s no longer clear Cordray will make it until his term is up in 2018 — or what Trump will do.
If he’s smart, he’ll let Cordray do his thing until the legal battle plays out. This will probably mean new regulations on payday lenders, auto loans, and possibly even data security in the next year. But afterward, Cordray’s prescheduled exit would give Trump a clean break to reshape the agency.
Then he could appoint someone who will turn back the tide of the Obama years, just like he’s doing with several cabinet appointments. A likely option would be Kyle Hauptman, a major critic of the CFPB whom Trump has already tapped to assess current financial regulations for pruning, according to the Credit Union Times.
But if Trump is desperate for the approval of business leaders — and we know he’s always desperate for approval — he may set off yet another legal headache by claiming he already has the authority to kick Cordray to the curb — and doing so. Given his quick and reckless moves on building the wall and busting Obamacare without clear plans, funding, or a timeline, this seems more likely by the day.
It would give Democrats another cause to publicly rally around, and it’s probably the option liberals should hope for. Baptism by fire is the only way the CFPB will ever be able to cement its role as top consumer defender.