The declawing of the CFPB
“The Consumer Financial Protection Bureau, known as the CFPB, announced a fairly esoteric-sounding policy change on Wednesday, changing the way it issues investigational subpoenas. But consumer advocate groups are very concerned that this is another kneecapping of the agency that was supposed to have the back of ordinary Americans.”
—U.S. consumer protection just got even worse, Yahoo Finance
On the face of it, the rule change appears to be insignificant. The Consumer Financial Protection Bureau will now provide more detailed investigative subpoenas to companies they are probing. The problem is, those details could double as a roadmap for unethical companies who would want to destroy evidence or conceal it from the agency founded to protect consumers against aggressive and unethical financial industry players. It’s yet another fang pulled from a once-vital consumer watchdog that the Trump administration has made increasingly toothless.
A little history: The CFPB was conceived in 2008 as part of the Dodd-Frank financial reform act. It was the brainchild of Senator (and now, presidential candidate) Elizabeth Warren, who envisioned the agency as a bulwark against a consumer lending industry that was growing increasingly sophisticated and even predatory—with credit agencies run amok, unscrupulous debt collectors, and payday lenders trapping low-income borrowers in endless cycles of debt and fees. The CFPB was supposed to stand up for the little guy through strict industry regulations and tough penalties for bad actors.
Under the agency’s first director, Richard Cordray, it did just that. The CFPB filed action after action to keep the consumer finance industry in check, recovering $12 billion from financial institutions that cheated tens of millions of Americans. At the time Cordray left in late 2017 (to make an ultimately unsuccessful run for Ohio’s governorship), the CFPB was preparing to impose a strict new rule clamping down on the exploding payday loan industry that plies low-income borrowers with short-term loans that can accumulate fees and interest at exorbitant rates as they get rolled over into further loans. The New York Times called the agency under Cordray’s leadership “perhaps Washington’s most feared financial regulator.”
Then, the Trump administration took over. Mick Mulvaney, who as a Congressman had suggested the CFPB ought to be abolished, was installed as Cordray’s successor. With Mulvaney at the helm, the agency began to atrophy. The new leadership immediately put the brakes on enforcement cases, and stopped requesting new funding and staff. In 2018, Mulvaney’s CFPB puts its investigation of the 2017 Equifax breach on ice and announced that it would reconsider the new rule clamping down on the payday loan industry. Mulvaney also made it harder for agency investigators to get internal approval to issue civil investigative demands, or CIDs—the kinds of subpoenas at issue in the rule change highlighted in the Yahoo report.
Which brings us back to that report. According to this latest rule change, when the agency issues a CID, they now must provide detailed information about the nature of the investigation for which they’re seeking information. When you’re probing a seriously shady company, that’s kind of like giving them a list of exactly what documents to shred. “This is the kind of investigative approach a defense lawyer would have crafted,” F. Paul Bland, executive director of Public Justice, told Yahoo.
In short, the agency has gone from being a fearsome financial regulator, to “one of the weakest investigative agencies in the country,” according to Bland, who, in disgust, dropped the “C” in the agency’s name and referred to it as the “Financial Protection Bureau.”
What’s a concerned citizen to do? In the short term, you can call your representative to voice support for legislation to reverse some of Mulvaney’s changes. In the medium term, you can lend a hand to the campaign of a presidential candidate who promises to restore to the CFPB the leadership, vision, and resources to be the robust consumer bodyguard it was designed to be—and once was.