The Washington PostDemocracy Dies in Darkness

Trump is systematically backing off consumer protections, to the delight of corporations

Budget director Mick Mulvaney was installed as interim leader of the Consumer Financial Protection Bureau.
Budget director Mick Mulvaney was installed as interim leader of the Consumer Financial Protection Bureau. (Jabin Botsford/The Washington Post)

President Trump and the regulators he appointed are taking a far less aggressive approach to consumer protection than their predecessors, delaying key regulations and imposing fewer penalties against financial institutions and other corporations accused of wrongdoing, according to a Washington Post review of available data and interviews with consumer advocates and government officials.

At the Consumer Financial Protection Bureau, for example, enforcement actions have dropped from an average of three-to-five each month during the past four years down to zero since a Trump appointee took charge of the agency in late November.

The Labor Department has delayed full implementation of a rule requiring financial advisers to act in their clients’ best interest.

And the Department of Education has withdrawn Obama-era regulations meant to strengthen protections for student borrowers.

Mick Mulvaney said on Nov. 27, 2017, that President Trump wants him to stop the Consumer Financial Protection Bureau from "strangling access to capital." (Video: Reuters, Photo: JOSHUA ROBERTS/Reuters)

The new approach — welcomed by banks and business leaders — has alarmed consumer advocates who fear it gives an advantage to Wall Street and other powerful industries while leaving ordinary Americans more susceptible to fraud, discrimination and predatory lending.

“There hasn’t been a lot that has been methodical about this presidency, but I do think Trump is systematically dismantling consumer protections,” said Mark Totten, a Michigan State University law professor who studies the enforcement of consumer protection laws and a 2014 Democratic candidate for Michigan attorney general.

The new direction affects agencies that touch nearly every aspect of consumer life, advocates say — from how Americans access credit and car loans to the safety of cribs and cellphones.

The regulatory pullback illustrates a philosophical difference over how best to protect consumers. Barack Obama, in response to the financial crisis that rocked the first year of his presidency, attempted to rein in Wall Street and big banks with tighter regulation of the banking system. He wielded his executive power to force change in other industries, as well.

Critics accused Obama of acting by regulatory fiat. They blamed his administration for imposing costly regulatory burdens that stymied businesses and hurt the people it claimed to help by, for instance, making it more difficult for consumers to secure loans.

“For too long, the guise of consumer protection has been used to benefit trial lawyers, government bureaucracies, and ambitious politicians looking for their next job,” Lindsay Walters, deputy White House press secretary, said in a statement. “The Trump administration has put the focus of consumer protection back where it belongs: on protecting consumers and enabling them to make better decisions for themselves.”

Case in point: Trump proclaimed March 4-10 as “National Consumer Protection Week,” saying it is “an opportunity for Americans to learn about their consumer rights” so they can better protect themselves from predatory practices, identity theft and fraud.

Nowhere is Trump’s deregulatory efforts more evident than at the Consumer Financial Protection Bureau, an independent watchdog agency established after the financial crisis that has delivered more than $12 billion in consumer relief to more than 29 million people.

Trump, in this 2019 budget plan released last month, proposed cutting the agency’s budget and restricting its enforcement powers “to prevent actions that unduly burden the financial industry and limit consumer choice.”

He installed White House budget director Mick Mulvaney, who once compared government regulations to a “slow cancer” and called the bureau a “joke,” as the bureau’s interim leader last November.

In his short time in the job, Mulvaney has launched a top-to-bottom review of how it operates. The agency’s five-year strategic vision statement, released in February, says it will now act with “humility and moderation.”

Last week, Mulvaney told a gathering of credit union executives what many had been clamoring to hear: “We are not going to bend over backward to try to come up with creative ways to sue people just because we have the authority to do that.”

The CFPB, which has not filed any new enforcement cases since he took charge, would increasingly defer to state regulators and attorneys generals rather than file its own lawsuits, he told a group of state attorneys general also in Washington last week for a conference. “Why we think we know better how to protect consumers in your state than you do surprises me a little bit,” Mulvaney said. “I don’t think you’ll be seeing us do much of that anymore.”

Already, Mulvaney has bolstered the hopes of payday lenders who were repeatedly targeted under the Obama administration with high-dollar fines. The bureau in January dropped a nearly four-year-old investigation into a subprime lender that allegedly charged customers exorbitant interest rates. It also dropped a lawsuit against four payday lenders that charged interest rates as high as 950 percent.

A bureau spokesman said the CFPB does not comment on the status of investigations and is reviewing all lawsuits and inquiries instigated by the previous leadership. But Mulvaney noted last week that several state attorneys general had objected to the lawsuit filed against the payday lenders.

The bureau is also reconsidering a rule that requires payday lenders to verify that borrowers can afford their debts and which caps the number of times someone can take out successive loans.

Trump is “trying to cut everything off at the root as quickly as possible,” said Charles Gabriel, an analyst with Washington-based research firm Capital Alpha Partners, adding that any vestige of Trump’s populist campaign rhetoric has “fallen by the wayside.”

Mulvaney’s takeover of the agency has also been encouraging for auto lenders, several of which faced multimillion dollar fines after a 2013 crackdown on business practices that the bureau alleged led to minority borrowers being charged higher interest rates than whites. Many auto lenders lashed out at the CFPB’s investigations, while others, such as BB & T, made significant changes to how they did business.

“The CFPB came in with an iron club and made us change the way we priced our products,” Kelly King, chief executive of BB & T, said in a January call with analysts.

After Mulvaney took control of the bureau, he stripped its fair lending office of its enforcement powers. The CFPB now appears less likely to pursue such cases, giving auto lenders some relief, industry analysts said. BB & T, for example, recently announced it would return to its previous auto financing model.

The regulatory shift, often following lobbying by various industries, reaches beyond the consumer protection bureau.

Education Secretary Betsy DeVos, last spring, revoked Obama-era directives that penalized student loan servicing companies for poor service and held companies accountable for providing borrowers with accurate and timely information about their debt.

Her actions, which consumer advocates say place student borrowers at greater risk of default, followed complaints from companies that the demands would be expensive and unnecessarily time consuming.

DeVos has cast her rollbacks as necessary reforms to complex policies. She has also delayed forgiving the loans of students defrauded by for-profit colleges.

The Consumer Product Safety Commission also appears to be easing enforcement now that Trump has nominated Republican Ann Marie Buerkle to head the agency, said Rachel Weintraub, legislative director and general counsel of the advocacy group Consumer Federation of America.

As commissioner, Buerkle routinely voted against civil penalties for companies that failed to promptly report product safety problems. Of the 21 settlement votes during her nearly five-year tenure, she rejected 16, according to a Post review of public records.

Since Buerkle was named acting chair last February, the commission has overemphasized “collaborating” with manufacturers instead of investigating them and potentially assessing penalties, said commissioner Elliot Kaye, a Democrat who had been chairman of the commission under Obama.

“More often than not, collaboration seems to be a code word for capitulation by the agency,” said Kaye, who is barred from discussing specific cases.

Buerkle said in a statement to the Post that her commitment to consumer safety has not changed and noted that Democrats, for the time being, still hold a slim majority on the commission.

“We should not be hoping for multimillion dollar penalties,” Buerkle wrote in 2016 before assuming the active chair position. “We should be hoping for zero penalties.”

The commission has yet to issue any penalties for the 2018 fiscal year, which began in October. It negotiated six penalties in the 2017 fiscal year averaging $4.9 million each and five penalties in 2016 averaging $6.3 million each, according to a Post analysis.

“It’s gone pretty dark on civil penalty cases,” Kaye said.

The commission can also refer cases to the Justice Department, when it is unable to reach an agreement with companies. Under Trump, the Justice Department has announced three civil penalties this fiscal year relating to cases begun before he assumed office.

The commission under Obama had sought a $7.1 million penalty against Michaels Stores in 2013 following an earlier recall of vases that shattered in consumers’ hands, said Nancy Nord, a Republican and former commission chair with firsthand knowledge of the case, and who considered the amount excessive. T he arts and crafts retailer countered with an offer to pay $1.5 million, Nord said — the same amount the Justice Department ultimately agreed to in February.

Meanwhile, the Trump administration is also delaying key components of a Labor Department rule finalized during the Obama administration that requires financial professionals advising people about their retirement accounts to act in their clients’ best interests instead of their own. The rule was meant to protect mom-and-pop investors from being steered into expensive investments they don’t need.

“This is an industry that relies on trust and once you get people to trust you, especially in these complex financial areas, you can get them to do almost everything,” said Phyllis Borzi, former assistant Labor Department secretary during the Obama administration, who is considered the mother of the so-called fiduciary rule.

Wall Street complained the rule was too complicated and would prompt financial advisers to offer only the most ordinary advice to clients for fear they could run afoul of regulators.

Other changes could be on the horizon. The Treasury Department plans in coming weeks to outline how the government will enforce a four-decade-old fair lending law that compels banks to lend to borrowers in low- and moderate-income neighborhoods.

The Obama administration had toughened enforcement of the 1977 Community Reinvestment Act, lowering banks’ performance ratings for charging high overdraft fees or steering minority borrowers into subprime mortgages. But new regulators have already signaled they would not pursue such cases as aggressively.

“We are talking about reducing oversight on an industry that was very much involved in bringing the national economy to its knees during the Great Recession,” said John Taylor, president and chief executive of the National Community Reinvestment Coalition, an advocacy group seeking to end discriminatory lending.

While Trump administration officials have vowed to use their power sparingly, that doesn’t mean it will not protect consumers, regulators say. Even some of the administration’s toughest critics have applauded Jay Clayton, the head of the Securities and Exchange Commission, for resisting industry pressure to allow the creation of new financial products using the virtual currency bitcoin and for cracking down on schemes taking advantage of other cryptocurrencies. Investor advocates have warned that such products would be too risky for many people.

Overall, business leaders are rejoicing over the regulatory reprieve after what the U.S. Chamber of Commerce has decried as “eight long years of regulation run amok.”

Reducing rules — and avoiding new ones — is a “big win for American business,” Joe Johnson, the Chamber’s executive director for federal regulatory process review and analysis, wrote in a blog post assessing Trump’s first year. “Going forward, we should expect even more of what we saw in 2017 as the larger scale regulatory reform efforts . . . begin bearing fruit.”