Column: A good consumer agency is a weak consumer agency, says Trump’s consumer watchdog
If the stakes weren’t so high, it would be incredibly fun watching financial firms and their Republican allies repeatedly make the case that the Consumer Financial Protection Bureau is a rogue agency determined to undermine capitalism, democracy and the American way of life.
My absolute favorite such attack came last September when the U.S. Chamber of Commerce, the Financial Services Roundtable and other business groups expressed shock and outrage that the CFPB had decided consumers should have a right to sue businesses, rather than be forced to arbitrate.
The business groups, arguing that arbitration is way better than litigation, sued the agency.
That’s a tough act to follow. But Mick Mulvaney gave it a good go.
He’s serving as interim director of the CFPB while simultaneously working full time as President Trump’s budget director. Thus, he’s the White House official most responsible for a spending plan the Congressional Budget Office says will result in a deficit of $1 trillion by 2020 and a national debt of $33 trillion by 2028.
Mulvaney appeared before Congress last week to make a legally required report to lawmakers on how the CFPB is doing.
Short answer: Not so good.
Apparently the agency has been overly concerned with consumer protection and has been unfairly preventing businesses from absconding with people’s cash.
The CFPB needs “to recognize free markets,” Mulvaney said, and it needs to take “a humble approach to enforcing the law.”
Because if there’s anything banks and payday lenders respect in government regulators, it’s humility.
Mulvaney laid out a four-point plan for Congress to improve the CFPB by making it less effective and less independent.
Funding: Mulvaney wants the bureau funded by Congress rather than its current funding source, the Federal Reserve. This might sound like a modest change, but it’s not.
If Congress is handling appropriations, that will give industry lobbyists far more influence over how much money the CFPB receives and what it can be used for. It will allow the industry’s deep pockets to win over key lawmakers and sway important decisions.
This is precisely what using the Fed, an independent body, as the bureau’s funding source was intended to avoid.
Presidential control: Mulvaney wants the CFPB director to report to the president, which is a roundabout way of saying he wants the president to be able to fire the agency director at will. As things currently stand, the director only can be sacked if found guilty of “inefficiency, neglect of duty or malfeasance in office.”
As with the funding mechanism, this deliberate distance from the Oval Office was intended to maintain the independence and integrity of the agency, and to prevent a president from interfering with the CFPB for political reasons.
In other words, to avoid what’s happening right now.
New oversight: Mulvaney wants a newly created inspector general to monitor the CFPB’s activities. At present, that job is fulfilled by the Federal Reserve’s inspector general, who is appointed by the Fed chairman.
Mulvaney didn’t spell out how a new inspector general would change things, but the implication is that this new overseer would be appointed by the president and would give even more control to the White House.
Legislative approval: Mulvaney wants Congress to have final say over any major rules enacted by the CFPB, such as that one I mentioned earlier about arbitration.
Think of this as congressional veto power. If lawmakers — or their corporate sponsors — don’t like a rule, they’d be able to overturn it. No need for messy lawsuits.
Mulvaney said these changes would make for a fairer, more accountable government agency, better equipped to serve the people’s interests.
“By structuring the bureau the way it has, Congress established an agency primed to ignore due process and abandon the rule of law in favor of bureaucratic fiat and administrative absolutism,” he said.
It goes without saying that Mulvaney is heavy into hooey.
“He’s trying to defang and defund the bureau so future directors can’t carry out its mission,” said Mike Litt, consumer campaign director for the U.S. Public Interest Research Group.
Lisa Donner, executive director of Americans for Financial Reform, said Mulvaney “has spent four months doing the bidding of big banks and financial companies, notably the payday lenders, instead of policing them on behalf of the public.”
For all their howling about regulatory overreach and an agency run amok, critics of the CFPB can’t cite a single action by the bureau that went against the interests of consumers. Not one.
Nor has the agency hindered banks’ ability to rake in piles of cash. On Monday, Bank of America announced its biggest quarterly profit ever — nearly $7 billion pocketed during the first three months of the year.
Meanwhile, the CFPB has provided consumers with about $12 billion in refunds and debt relief from financial firms that overstepped ethical or legal boundaries. It has introduced new transparency to the mortgage market and new regulations for payday lenders.
Lisa Gilbert, vice president of legislative affairs for Public Citizen, called Mulvaney’s proposed changes “a knife through the heart of the CFPB’s mandate to protect consumers from financial industry abuses.”
She said his goal is clearly “to block, defund and politicize” consumer safeguards put in place after banks and other financial firms nearly collapsed the U.S. economy through their reckless behavior and ushered in the Great Recession.
Mulvaney made clear his high regard for public service when he told lawmakers last week that he could “just sit here and twiddle my thumbs while you all ask questions” and still meet his statutory requirement to account for the CFPB’s actions.
He also said his critics were being unduly harsh about his brief tenure running the consumer agency because “I have not burned the place down,” which sets the regulatory bar about as low as you can go.
The reality, which neither Mulvaney nor the Republican lawmakers who egged him on seem to understand, is that real people are being harmed by unscrupulous financial practices.
For example, Citibank misled borrowers into thinking they weren’t eligible for tax breaks on interest paid on student loans, and wrongly charged people late fees and higher interest. The CFPB wrangled $3.75 million in compensation and slapped Citi with a $2.75-million fine.
That enforcement action was listed on the bureau’s website on Nov. 21.
Three days later, Trump named Mulvaney interim director.
There hasn’t been a single crackdown since.