Payday lenders rejoiced the day after Thanksgiving when President Donald Trump unlawfully appointed, in our view, Mick Mulvaney, one of the industry’s staunchest allies, as acting director of the Consumer Financial Protection Bureau. This backdoor, hostile takeover of an independent agency is one of the swampiest moves the administration has made.
Mulvaney is adamantly anti-consumer. Having received more than $60,000 in campaign contributions from payday lenders during his short tenure in Congress, Mulvaney has consistently called for the elimination of the bureau.
As a member of the U.S. House of Representatives, he co-sponsored a bill to repeal the 2010 Wall Street reform bill, a law that created the CFPB following the 2008 financial crisis. He’s voted to politicize the CFPB’s funding resource, supported the effort to dismantle the agency’s effective leadership structure, and he’s carried water for payday lenders — having previously introduced a proposal last year to undermine the CFPB’s recent payday and car title lending rule while the agency was still undergoing its rule-making process.
The payday rule, which was finally released in October, had stakeholder input and years of extensive research confirming that these 300 percent interest loans trap borrowers in an unaffordable cycle of debt, causing severe financial harm. At the heart of the rule is the common sense requirement that lenders determine a borrower’s ability to repay before lending money. In a recent poll of likely voters, more than 70 percent of Republicans, independents and Democrats support this idea. The requirement helps to ensure that a borrower can repay without reborrowing and without defaulting on other expenses.
It’s disingenuous to believe that Mulvaney has the best interest of consumers at heart when his record shows such a disdain for consumer protection. He’s even gone as far as calling the CFPB “a sick, sad joke” and claimed that the agency is “the very worst kind of government entity.”
Mulvaney’s short-sighted view about the bureau is wrong. The CFPB is an instrument of good, and its staff works tirelessly to fulfill its mission.
Since its creation, the CFPB has recovered more than $12 billion in relief to nearly 30 million consumers harmed by illegal practices of financial institutions. It is a vigilant enforcer of civil rights laws, fighting against discriminatory practices in the financial marketplace, including bringing actions to enforce fair lending laws that protect consumers of color from being charged more for a mortgage, auto loan, or credit card. The CFPB cracks down on the tricks and traps of credit cards companies, payday lenders and bad actors in the industry from taking advantage of distressed Americans.
The bureau protects students from being wronged by for-profit colleges, older Americans from being harassed by abusive debt collection practices, and veterans from falling into the payday lending debt trap.
These are positive and important changes the bureau has made over the past six years to bring accountability and transparency to Wall Street. But the current uncertainty surrounding the bureau’s leadership threatens that progress, not only because Mulvaney is the antithesis of consumer protection, but because his appointment as acting director threatens the independence of the bureau.
In his day job, Mulvaney is the director of the Office of Management and Budget, which means he reports directly to Trump. The CFPB, as an independent agency, can’t be run by someone who takes orders from the president — that defeats its entire purpose. Congress was deliberate in 2010 when it created the agency. The CFPB, like the other financial regulatory agencies, is supposed to be insulated from political interference and influence. That makes Mulvaney unfit to head the CFPB, even if on a temporary basis.
Besides, running the bureau is supposed to be a full-time job, not a part-time gig like Mulvaney is treating it. Further, the director of the CFPB sits on the board of the Federal Deposit Insurance Corp. and the Financial Stability Oversight Council. To have the head of the OMB hold all of these seats offers the president unprecedented reach and inappropriate influence over financial markets and consumers.
We’ve already seen the payday lenders influence him on the same day he showed up at the CFPB office last week. He instituted a hiring freeze, halted rule-making and guidance, and in his first press conference dabbled in discussing ways to stop the payday lending rule from moving forward.
And just last week, payday lending spokesperson Dennis Shaul said that the industry is “poised to file a lawsuit” in the coming weeks to stop the payday lending rule from moving forward. “At that point, the agency would be in the position of defending a rule that they may or may not believe in. They would take a fresh look at it, I would think,” he said.
Having Mulvaney concede to the payday lenders and abandon this rule would compromise the bureau’s commitment of protecting consumers from the payday lending debt trap, and it would undermine the enormous amount of work the CFPB staff put into developing this rule, which took years in the making.
It’s time to start calling the appointment of Mulvaney for what it really is: the beginning of the elimination of the bureau driven by the payday lending industry, and an attempt to bring our economy back to a financial crisis.
Need we remind ourselves, at the height of the Great Recession, an estimated 1 out of every 54 homeowners lost their homes. Workers and seniors lost lifetimes’ worth of savings or retirement accounts, small businesses went under, and vulnerable consumers fell victim to toxic and manipulative financial products offered by Wall Street and the big banks. It was the deepest recession our country had faced since the Great Depression, and it was spurred by splintered, ineffective consumer financial protection practices.
We can’t afford to revert to those wild, wild West days. We need the bureau to continue its important work uninterrupted and without undue influence. We can’t achieve that with Mulvaney at the helm.
Melissa Stegman is a senior policy counsel at the Center for Responsible Lending.
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