President-elect Donald Trump campaigned as a champion of the financially stressed middle class. To see how true he is to his word, watch how he handles the direction of the Consumer Financial Protection Bureau.
The agency was created as part of the Dodd-Frank financial reform legislation of 2010, which was passed in response to the unscrupulous behavior of many companies on Wall Street.
Will the Trump administration replace the CFPB’s current director, Richard Cordray — who has been aggressively going after businesses that take advantage of consumers — with someone who is cozy with corporate America? Cordray’s term isn’t up until 2018, but a court has ruled that he can be removed at will by the president.
The CFPB has been under attack since its inception mostly by Republicans who have argued that the financial services industry is already heavily regulated. And yet some of those same companies caused a housing and financial crisis that harmed millions of consumers nationwide.
We don’t even have to go back as far as the Great Recession to see that financial companies need more, not less, oversight. Two months ago, the CFPB fined Wells Fargo $100 million for — unbeknown to its customers — opening hundreds of thousands of unauthorized bank and credit-card accounts.
In its short existence, the watchdog agency has forced corporations to return more than $11.7 billion to consumers. To that point, Wells Fargo has to pay full restitution to all of its victims.
Last month, the U.S. Court of Appeals for the District of Columbia Circuit opened a door to weaken the CFPB by ruling that its structure is unconstitutional.
The case was brought before the court by PHH, a mortgage lender that had been fined $109 million after the agency concluded that it had illegally referred consumers to mortgage insurers in exchange for kickbacks.
In addition to wanting its fine vacated, PHH sought to disband the CFPB. The company was successful regarding the fine, but thankfully the court didn’t destroy the agency. It did, however, effectively turn the CFPB into a political pawn — which is something that Dodd-Frank had attempted to avoid.
Under the ruling, the agency’s director can be removed at the president’s discretion. Under Dodd-Frank, the director could be removed only for “cause.” That’s an important distinction, because my fear is that a new director who is too sympathetic to corporations rather than being a fierce champion for consumer rights could render the agency largely impotent.
One of the major criticisms of the CFPB is that it is an unaccountable bureaucracy, because its funding comes from the Federal Reserve and not Congress. But that’s a good thing.
Congress wants to hold the purse strings so it can make the CFPB dance for it. But this puts the agency in the position of playing politics when it should be singularly focused on protecting consumers.
In other words, the CFPB works for us — we the consumers, who don’t have as much money or lobbying power as well-heeled financial companies.
Just look at the recent funding cuts at the Internal Revenue Service. In a report this past spring, the Center on Budget and Policy Priorities — which was founded to focus on how federal budget decisions affect the most vulnerable Americans — said that cuts to the IRS’s budget since 2010 “have significantly weakened taxpayer services.” Just try to get through to the agency on the phone during tax-filing season.
The IRS has some problems, to be sure, but the budget woes are keeping this agency from responding more quickly to people with tax issues. National Taxpayer Advocate Nina E. Olson has repeatedly complained in her reports to Congress about the toll that the funding decreases have had on the quality of taxpayer services.
Do we want the CFPB to be yoked back like the IRS just at a time when the agency has its sights set on more protections for consumers in a number of areas, including payday lending and unfair debt collection?
The CFPB has a complaint portal that works with consumers to get a response from companies. It has handled more than 1 million complaints involving financial products and services. The agency is using the database to identify trends in unfair financial practices. That’s a great service to consumers. What if that gets shut down?
In a recent blog post, Sen. Elizabeth Warren (D-Mass.) put Trump on notice.
“Americans want to hold the big banks accountable,” she wrote. “That will not happen if we gut Dodd-Frank and fire the cops responsible for watching over those banks.”
Trump hasn’t provided specifics on any meaningful policies that would protect consumers. And it’s clear why. He’s aggressively pro-business, a stance that far too often is at odds with consumer protection.
Readers may write to Michelle Singletary at The Washington Post, 1301 K St. NW, Washington, D.C. 20071 or firstname.lastname@example.org. To read previous Color of Money columns, go to http://wapo.st/michelle-singletary.