Let’s say there was a federal agency charged solely with protecting consumers from financial abuse. And let’s say that agency was so good at its job, it succeeded in returning $12 billion to consumers who had been ripped off by greedy banks and lenders.
How would you reward that agency?
If you’re President Trump, the answer is to slash its funding by 23% and get rid of rules “that unduly burden the financial industry.”
The $4.4-trillion White House budget proposal unveiled last week drew heat for its generous allotments to the military at the expense of social programs, as well as its ridiculous pretense that $1.5 trillion in much-needed infrastructure spending would be provided mainly by state and local governments.
I also pointed out that the budget plan included only halfhearted measures to fulfill Trump’s stated goal of reducing sky-high prescription drug prices.
Nearly overshadowed by these developments was the budget’s defenestration of the Consumer Financial Protection Bureau, which Trump has made a top policy goal.
It’s been clear since our businessman-in-chief took office that he had no love for a federal consumer watchdog — and that his administration was more than happy to dance to the tune of financial-services industry lobbyists who wanted it dead.
After White House budget chief Mick Mulvaney became the bureau’s interim director in November, he systematically reined in the CFPB’s enforcement actions and openly declared his intention of creating a more business-friendly agency.
The administration’s middle finger to consumers was on full display last week when Mulvaney, in presenting the CFPB’s latest five-year strategic plan, said that “we have committed to fulfill the bureau’s statutory responsibilities, but go no further.”
That’s the regulatory equivalent of a supermarket saying, “Yeah, we’ll ring you up but bag your own damn groceries.”
And if Trump has his way, that supermarket will close down as soon as he can get away with it.
“It’s open season on consumers,” said Sally Greenberg, executive director of the National Consumers League. “The most predatory actors — payday lenders, student loan companies, the debt collection industry — can operate with virtual impunity from federal regulators at the bureau.”
The agency’s new mantra of “don’t worry, be happy” was spelled out last month when Mulvaney said the CFPB would “reconsider” its oversight of payday and car title loans. For good measure, he dropped a lawsuit against a group of payday lenders that allegedly duped customers by failing to reveal annual interest rates of nearly 1,000%.
Mulvaney also has issued a series of invitations for businesses to submit feedback on the bureau’s operations and suggest “constructive” changes.
Last week, banks and other companies falling under the CFPB’s oversight were asked to assess “the overall efficiency and effectiveness of its supervision program and whether any changes to the program would be appropriate.”
These could be two completely different government agencies.
Under Obama, the bureau’s top goal was to “prevent financial harm to consumers while promoting good practices that benefit them.”
Under Trump, the No. 1 goal is to “ensure that all consumers have access to markets for consumer financial products and services.”
The CFPB’s secondary goal under Obama was to “empower consumers to live better financial lives.” Under Trump, it’s to “implement and enforce the law consistently to ensure that markets for consumer financial products and services are fair, transparent and competitive.”
“What happened to protecting consumers from financial harm?” asked Joe Ridout, a spokesman for the advocacy group Consumer Action. “The implicit message of the new plan is that the CFPB will wave through whatever predatory practices companies can come up with.”
He described Mulvaney as “an arsonist burning down every consumer protection he can find.”
In his introduction to the new strategic plan, Mulvaney said any federal agency that strives to go above and beyond the call of duty “ignores the will of the American people.”
“Pushing the envelope,” he said, “risks trampling upon the liberties of our citizens.… I have resolved that this will not happen at the bureau.”
To accomplish this regime of low expectations, he’s capping the CFPB’s budget for the upcoming fiscal year at $485 million, or about as much as the agency spent in 2015. Its annual budget is currently more than $630 million.
Mulvaney is already off to a great start in terms of emptying the bureau’s coffers by requesting no new funds for the current quarter. Instead, he’ll deplete a “reserve fund” intended to help pay for investigative work, which the bureau won’t be doing much of anymore.
By 2020, the Trump administration wants the CFPB to no longer be funded by the Federal Reserve. It wants funding to be controlled by Congress, which would mean more influence by industry lobbyists.
In its budget proposal, the White House says its objectives for the bureau are to “impose financial discipline, reduce wasteful spending and ensure appropriate congressional oversight.”
“These changes,” it says, “would allow CFPB to focus its efforts on enforcing enacted consumer protection laws and eliminate the functions that allowed the agency to become an unaccountable bureaucracy with unchecked regulatory authority.”
As I said, that “unchecked regulatory authority” resulted in $12 billion being returned to consumers. It forced mortgage lenders and credit card companies to be more transparent.
Oh, and it slapped Wells Fargo with a $100-million fine after the bank opened millions of accounts without customers’ knowledge.
Christine Hines, legislative director for the National Assn. of Consumer Advocates, said Trump’s budget and Mulvaney’s strategic plan make clear their aim “is to hamstring the CFPB and make it impossible for it to fulfill its mission to protect consumers from financial rip-offs.”
“It is a solid wink to payday lenders, credit bureaus and big banks that they are free to cheat and scam regular people with impunity,” she said.
Trump talks a lot about “winning.”
Now you know whom he’s thinking of.