Since November, the Trump administration has taken steps to overhaul the Consumer Financial Protection Bureau (CFPB) — the Obama-era consumer watchdog agency that Democrats created after the global financial crisis to monitor American consumers’ financial interests.
Based largely on a proposal from then-Harvard law professor (and now U.S. senator from Massachusetts) Elizabeth Warren, the CFPB acted aggressively in its first five years. It handled nearly 1 million consumer complaints, its enforcement actions returned nearly $12 billion dollars to 27 million consumers, and it put into place a bevy of new financial regulations. Sen. Richard J. Durbin (D-Ill.) recently quipped that Wall Street hates the CFPB “like the devil hates holy water.”
But Republicans are now attacking the CFPB. Will they succeed in dismantling it from the inside? How durable will their efforts be? Here are four keys to understanding what is happening at the CFPB.
1. Dismantling the CFPB is a Republican priority
Rep. Jeb Hensarling (R-Tex.) has summed up Republican complaints with the CFPB by calling it a “rogue agency.” Republicans have been gunning to dismantle the agency ever since it was created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. Republicans have proposed bills to weaken the agency by challenging its funding, leadership structure, oversight and data collection. Abolishing the CFPB was a prominent piece of the 2016 Republican Party Platform.
Efforts to curb the CFPB failed until unified Republican control of Congress and the White House changed the game. Republicans have used the Congressional Review Act, which The Monkey Cage’s Andrew Rudalevige explained here, to overturn the CFPB’s rule banning mandatory arbitration. They threatened to do more, before the need was preempted by Trump administration actions.
2. Trump sent a fox to guard the henhouse
The agency’s first director, Barack Obama appointee Richard Cordray, stepped down in November. After a “Game of Thrones”-style battle over who was the rightful leader of the agency, Trump appointed the head of the Office of Management and Budget, Mick Mulvaney, as interim director. Mulvaney has called the agency a “sick, sad” joke and said the director is like “a one-person dictator.”
Because of the agency’s leadership structure, Mulvaney can play a major role in steering its activities. Notably, when Democrats debated in 2009 how to rewire financial regulation in the wake of the crisis, proponents of a consumer financial agency disagreed about whether it should be run by a single director or a multi-member board. Advocates acknowledged that an individual at the helm would be able to move more deftly but would leave the agency more susceptible to radical change with new leadership. A single director was ultimately selected over earlier plans calling for a five-member commission. It paid initial dividends for supporters of stronger financial regulation during Cordray’s term. With Mulvaney in charge, those gains can be reversed.
In two months with Mulvaney at the helm, he has refused to request funding for the agency, saying it can function on its emergency reserve fund; reconsidered landmark payday lending regulations drafted by the CFPB under Cordray; and scaled back ongoing investigations — including one into the Equifax data breach.
3. The CFPB might lose what makes it different
More significant, Mulvaney has revamped the agency’s mission. Mulvaney described his vision as a CFPB that works on behalf of banks and lenders in addition to ordinary Americans. All news releases now feature a new mission statement that emphasizes the CFPB’s role in “regularly identifying and addressing outdated, unnecessary, or unduly burdensome regulations.” That’s a dramatic reversal from what Democrats envisioned.
Democrats designed the CFPB to protect consumers, making it unique among financial regulatory agencies. Historically, U.S. financial regulators were designed primarily to keep financial institutions stable and profitable. In fact, most were established before 1968, when the first consumer-focused federal lending legislation, the Truth in Lending Act, was passed. At the time of its passage, key financial regulators acknowledged to Congress that they might struggle to carry out this new law given their focus on banks and “very limited” experience in consumer protection. If Mulvaney succeeds in remolding the CFPB, it may remove one of the agency’s most distinctive features: its focus on consumer interests.
4. It’s a popular cause but an unknown agency
What’s particularly puzzling about GOP attacks on the CFPB is that Americans from both parties report support for the agency and its major regulations. So why are Republicans willing to risk political backlash?
My research suggests an answer. In 2017, I conducted an online survey of 1,500 U.S. adults, asking for opinions about credit and government regulation. Respondents were provided by Survey Sampling International to approximate a nationally representative sample similar to the American National Election Studies.
I found that while Americans support the agency when it is described to them, most can’t identify the CFPB and its role without additional information. You can see that in the figure below, which compares respondents’ ability to identify the CFPB to that of more well-known agencies, the Food and Drug Administration and the U.S. Agriculture Department. Just over half of respondents said there was a federal agency for protecting consumer finances; over 80 percent knew such an agency existed for food and drug regulation. More important, even among those who thought an agency existed, only 5 percent could name the CFPB, while over 75 percent could name either the FDA or USDA.
Of respondents who supported the CFPB, fewer than half said they would be willing to email their member of Congress to voice support, and only 1 in 4 said they would call their representative. There were notable partisan differences: 52 percent of supportive Democrats would email and 32 percent would call, versus 34 and 23 percent respectively of supportive Republicans. GOP lawmakers probably realize that they needn’t expect much political backlash.
What happens next?
In coming months, rule-making will probably slow as Mulvaney seeks information on the CPFB’s current operations. Congress may also work on eliminating or making less accessible the CFPB’s public database of consumer complaints.
Trump needs to nominate a permanent head. His appointment of Mulvaney allows him to serve for 210 days under federal vacancies law; then Trump must appoint and the Senate consider a permanent director. Given the GOP’s antipathy toward the agency, we should expect a nominee who vows to follow in Mulvaney’s footsteps.
Mallory E. SoRelle (@SoRelleM) is an assistant professor of government and law at Lafayette College, specializing in the study of American politics and public policy.