CFPB Director's resignation: A Lesson for Consumers

By R. David Michaels

With the November 24 resignation of Consumer Financial Protection Bureau (CFPB) director Richard Cordray, consumers have reason to fear that the watchdog Congress created in 2010 with the Dodd-Frank Act has been rendered toothless. President Trump’s appointment of CFPB basher Mike Mulvaney as its acting director legitimizes that fear.

Since its creation, the CFPB has steadfastly fulfilled its mission of protecting consumers from unscrupulous, profit-mongering companies. The CFPB has acted in consumers’ interest by protecting them through rule creation and enforcement fines that have returned damages, in some cases, to the harmed consumers.

In the wake of the Wells Fargo account scandal, the CFPB fined that banking institution $100 million, it hit Equifax and TransUnion for $23.1 million in fines, with $17.6 million going to harmed consumers, for false advertising related to credit score sales. The CFPB’s rule related to credit card late and over limit fees have saved consumers $11 billion since 2011, and over limit fees have become virtually extinct since the rules were implemented. Then, a November 17 rule published in the federal register requires pay day loans, auto title loans, and other small dollar advances to be predetermined whether borrowers can repay the loans before they are issued.

The CFPB found in a 2014 study that roughly 62% of all payday loans, which are often due in a week or two have annual interest rates of around 390%, trap consumers in a never ending cycle of debt due to the assessment of new fees when payment is not made in full on schedule. “This cycle of piling new debt to pay back old debt can turn a single unaffordable loan into a long-lasting debt trap,” Cordray said, in October.

Despite his rhetoric of protecting the common person, President Trump says the CFPB has “devastated” the banking industry and that it is a “disaster.” When Cordray resigned for an expected run for Ohio’s governorship, he tried to install his chief, Leandra English, as his successor. President’s constitutional authority would be undermined if he could not appoint a new CFPB director.

With that victory in hand, President Trump appointed Mulvaney as CFPB’s acting director Mulvaney, who continues to fulfill his duties as director of the Office of Management and Budget, is a questionable selection to protect consumers’ interests. As a Congressman, Mulvaney called the CFPB a “sick, sad joke,” and he introduced legislation to abolish the very agency he is now directing.

Consumers must now question whose interest Mulvaney will protect: theirs or the companies who fill his election coffers. According to data analysis by the Center for Responsive Politics, Mulvaney received $31,700 in the 2015-2016 election cycles from payday lenders, ranking him ninth among all congressional recipients. Mulvaney promised to check into the payday loan rule finalized in November on his first day as CFPB’s director.

As consumers, we have reason to fear the CFPB will become another drain on taxpayer resources without providing a return to us. Government agencies have a history of failing to fulfill their mission and becoming subject to perks to the upper echelon. We need not look any further than the Veterans’ Administration to find an agency that has wasted its scarce resources and disgraced the American public by nor caring properly for the veterans who protect our freedoms and way of life. With the acting CFPB director beholden to lecherous lenders and Big Finance, we can only wonder how long it will be before the CFPB is a government agency with a nice name but no teeth.

All this provides a lesson for consumers. As my co-author and I wrote in Winning the Credit Score Game, the Fair Credit Reporting Act defined corporations as a “person,” and the courts have used that legislative definition to hold that those “persons” may spend freely to influence our elective and legislative processes. To counter the corruption that ensues from corporate finance politicians and bureaucrats, we must educate and empower ourselves about personal finance and credit matters.

It is truly shameful that in a world where creditors, employers, and everyday businesses use our credit information and credit scores to set the terms of loans, or if they will even do business with or hire us, that we do not educate our children on these matters. While I note children here, the fact of the matter is that 57% of Americans are financially illiterate.

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