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The Consumer Financial Protection Bureau is being targeted for doing its job too well.
The CFPB was created after the financial crisis of 2008 to bring basic standards of fair play to a place where they had been sorely lacking: the world of mortgages, checking accounts, credit cards, credit bureaus, student loans, consumer loans and debt collection.
Since it got up and running less than six years ago, the CFPB has gotten off to a remarkable start. Among other things, it has crafted new mortgage lending rules that ban hidden fees; ended the sale of fraudulent add-on products by credit-card companies (returning more than $1.5 billion to consumers); shut down scams that target military families and seniors; and used its enforcement authority against illegal practices ranging from abuse by debt collectors, check cashers, and bogus “credit repair” services, to widespread wrongdoing by some of the country’s biggest banks, including JP Morgan Chase, Bank of America and Wells Fargo.
It was the CFPB that led the way in the investigation that nabbed Wells Fargo and forced it to cough up $100 million in penalties for opening millions of fraudulent consumer accounts. In all, the bureau has delivered almost $12 billion in financial relief to more than 29 million Americans cheated by financial companies.
In short, this is an agency that has been fulfilling its mission, without letting itself by cowed by Wall Street or captured by revolving-door insiders. That’s why it’s under attack, and why it urgently needs to be defended.
The attacks are coming from the big Wall Street banks, the payday lenders, the abusive debt collectors and their well-oiled friends in Congress. These forces opposed the bureau’s creation in the first place, and since then they have thrown their weight behind a seemingly endless series of bills, amendments and sneaky budget ploys designed to undermine the CFPB’s effectiveness. In recent days, they have been whispering in the new president’s ear: “Fire the director.” Doing so would be terrible for American families, and for our economy. And it would be unlawful.
Under the leadership of Director Richard Cordray, the bureau has helped consumers while being deliberate, fair and open-minded. Cordray himself has been widely praised. Some bankers have even acknowledged his readiness to take their views into account. But because Cordray has demonstrated an ability – unfortunately rare among regulators – to stand up to the power of the lobbyists, he and the bureau have become targets.
Those who advocate his dismissal see that as a way to derail a number of important ongoing projects. The bureau is currently drafting rules against unaffordable 300 percent-plus interest rate payday and car-title loans that trap people in a cycle of debt. It is also working to stop forced arbitration clauses that operate as a get-out-of-jail-free card for big banks that break the law. Rules against debt collection abuses and overdraft scams are also in the pipeline.
But Cordray’s term runs until July 2018, and by long-established legal precedent, he cannot be lawfully fired except for grave wrongdoing, for which there is no case. (A New Jersey insurance company has challenged the bureau’s leadership structure in court, but that case is in limbo pending further appeals.)
Congress could try to weaken or cripple the agency by enacting proposals backed by big banks and payday lenders to turn it into a deadlocked commission or eliminate its independent funding.
But that would be an obvious disaster for them. Any such move would be resisted fiercely by senators like Elizabeth Warren (D-Mass.) and Sherrod Brown (D-Ohio), and by organizations and individuals across the country. The House majority may pursue it anyway. Then the question would be whether 60 senators really want to take a stand so obviously against the interests – and the will – of the vast majority of the American people as we continue to struggle with the devastating effects of the Wall Street recklessness that crashed our economy in 2008.
As a candidate, Donald Trump campaigned against Wall Street and a rigged system. He should not back predatory lenders and Wall Street over the public. That includes his own voters, who, like all voters, overwhelmingly support the mission and the work of this agency.
By whatever means an attempt to defang the CFPB will be seen for what it is: a cave-in to the power of Wall Street and the financial lobby. Hollowing out the CFPB would be terrible for American consumers and families, hugely increasing the ability of banks and financial companies to write their own rules and control their own regulators.
That movie has a bad ending. We really don’t need to see it again.
Lisa Donner is executive director of Americans for Financial Reform. Ed Mierzwinski is consumer program director of U.S. PIRG.