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The Steady, Alarming Destruction of the Consumer Financial Protection Bureau

By newadmin / Published on Thursday, 08 Feb 2018 09:45 AM / No Comments / 5 views


The Consumer Financial Protection Bureau was established in the
aftermath of the financial crisis, as part of the 2010 Dodd-Frank
legislation, with the intended goal of protecting consumers from abusive
practices by banks, mortgage lenders, and other financial institutions.
In part because of its strong association with Elizabeth Warren, the
liberal Massachusetts senator who originally proposed creating such an
agency, the C.F.P.B. met immediate resistance from the financial
industry, which argued that the agency was too powerful and its rules
too onerous, and that its actions could end up stifling the economy. The
industry found ready allies among Republicans in Congress—notably
Representative Jeb Hensarling, the chairman of the House Financial
Services Committee—who echoed the financial industry’s complaints and
pledged to dismantle the agency, or at least dramatically reduce its
reach. Part of what gave the C.F.P.B. its power was its independence; it
had been designed to operate outside the bounds of influence of Congress
and the White House, and it was difficult for a President to replace the
person running it, which prompted its critics to argue that it had no
accountability. Last week, a federal appeals court upheld the agency’s
structure as legal and necessary. “Congress’s decision to provide the
C.F.P.B. director a degree of insulation reflects its permissible
judgment that civil regulation of consumer financial protection should
be kept one step removed from political winds and presidential will,”
Judge Cornelia Pillard wrote in the ruling. Supporters of the C.F.P.B. greeted the ruling as a major victory.

Still, with Donald Trump as President, the C.F.P.B. continues to be
under existential threat. The departure of the founding director,
Richard Cordray, in November, gave Trump the ability to choose the
person who would oversee the agency until a permanent director was
selected. Briefly, there were rumors that Trump was going to appoint his Wall Street-friendly Treasury Secretary, Steven Mnuchin, to the position of interim director. Instead,
he chose Mick Mulvaney, the White House budget director, who is on
record as saying that he
wanted to “get rid of” the C.F.P.B. altogether. Now Mulvaney is doing
just that, using the levers he has available to him to essentially
starve the C.F.P.B. of resources and let it wither. If there was ever
any doubt that the Trump Administration would simply do the financial
industry’s bidding, Mulvaney’s recent actions at the C.F.P.B. have
cleared it up. And anyone with a bank account or a stake in the American
economy should be concerned.

In January, Mulvaney submitted the agency’s quarterly funding request to
the Federal Reserve, asking for “$0” to finance the C.F.P.B.’s
operations for the next three months. (He argued at the time that the
agency had enough money on hand to cover its expenses.) He also,
somewhat inexplicably, singled out new regulations that the C.F.P.B. had put in place to rein in the widely loathed payday-lending industry. The new rules
were intended to make it more difficult for consumers to borrow more
money than they could realistically repay, potentially leading them into
a debt trap. Mulvaney has announced that his new agency would
be revisiting the payday-lending regulations to see if they should be
kept or not. He then dropped a lawsuit that the C.F.P.B. had filed
against a group of online payday lenders that had allegedly been
charging consumers interest rates as high as nine hundred and fifty per cent.

Then, earlier this week, Reuters reported that Mulvaney had allowed an investigation into the breach of customer
accounts at Equifax, one of the three major credit-reporting bureaus, to
fizzle out. In September, Equifax disclosed that hackers had stolen the personal information of a hundred and forty-three million
American consumers, prompting widespread outrage over how inadequately
the company was protecting its sensitive data. When the breach was
revealed, the C.F.P.B., under Cordray, announced that it would
aggressively investigate what happened, and help the credit agency to
safeguard its data in the future. According to Reuters, the
investigation has lost much of its momentum since Mulvaney took over.
(Mnuchin reportedly told the House Financial Services Committee on
Tuesday that it was something he was going to “discuss with him.”) Meanwhile, the
Washington Postreported that the Trump Administration stripped the agency of its ability to
pursue settlements with lenders accused of discriminating against borrowers.

Mulvaney has argued that it isn’t fair to subject businesses to rules
and penalties from a federal agency that can operate completely
independently. Yet even in this context some of his recent decisions
haven’t made sense. The payday-lending industry often justifies itself
by arguing that certain people can’t borrow money any other way—but this
argument doesn’t counteract the demonstrable financial damage that
exploitative loans can cause to people’s economic and mental health. But
there is another aspect to consider. Earlier this month, the Times, citing data
from the Center for Responsive Politics, reported that payday lenders have contributed more than thirteen million dollars
to members of Congress since 2010, most of it to Republicans. Mulvaney
himself has received close to sixty-three thousand dollars in political
contributions from the industry in his former incarnation as a
congressman from South Carolina. This April, the Times reported, the
payday-lending industry will hold its annual retreat at the Trump National Doral Golf Club, near Miami. (The group claims that the decision was made before the
election, largely based on price.) W. Allan Jones, who is the owner of hundreds
of payday-lending shops in the United States, as well as a lobbyist for
the industry, summed it up when he expressed his feelings for Mulvaney
thusly: “He seems extremely reasonable.”

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