Consumer Law & Policy Blog

Mulvaney in Bureau's Semi-Annual Report Calls for Limiting CFPB Independence

by Jeff Sovern

The report is here. Here's an excerpt from Mulvaney's statement at the beginning of the report:

As has been evident since the enactment of the Dodd-Frank Act, the Bureau is far too powerful, and with precious little oversight of its activities. Per the statute, in the normal course the Bureau’s Director simultaneously serves in three roles: as a one-man legislature empowered to write rules to bind parties in new ways; as an executive officer subject to limited control by the President; and as an appellate judge presiding over the Bureau’s in-house court-like adjudications. In Federalist No. 47, James Madison famously wrote that “[t]he accumulation of all powers, legislative, executive, and judiciary, in the same hands … may justly be pronounced the very definition of tyranny.” Constitutional separation of powers and related checks and balances protect us from government overreach. And while Congress may not have transgressed any constraints established by the Supreme Court, the structure and powers of this agency are not something the Founders and Framers would recognize. By structuring the Bureau the way it has, Congress established an agency primed to ignore due process and abandon the rule of law in favor of bureaucratic fiat and administrative absolutism. 

The best that any Bureau Director can do on his own is to fulfill his responsibilities with humility and prudence, and to temper his decisions with the knowledge that the power he wields could all too easily be used to harm consumers, destroy businesses, or arbitrarily remake American financial markets. But all human beings are imperfect, and history shows that the temptation of power is strong. Our laws should be written to restrain that human weakness, not empower it.

I have no doubt that many Members of Congress disagree with my actions as the Acting Director of the Bureau, just as many Members disagreed with the actions of my predecessor. Such continued frustration with the Bureau’s lack of accountability to any representative branch of government should be a warning sign that a lapse in democratic structure and republican
principles has occurred. This cycle will repeat ad infinitum unless Congress acts to make it accountable to the American people.

Accordingly, I request that Congress make four changes to the law to establish meaningful accountability for the Bureau:

1. Fund the Bureau through Congressional appropriations;
2. Require legislative approval of major Bureau rules;
3. Ensure that the Director answers to the President in the exercise of executive authority; and4. Create an independent Inspector General for the Bureau.                 

Fred Williams Report on Complaints About Credit Cards to CFPB Database

The report, at CreditCards.com,  is titled "Store-card issuers top list of complaints with the CFPB" and the subheading is" Purchase issues, unexpected fees or interest are most common card-related gripes." The report lists the most-complained-about issuers per $100M in card balances and also reports on which issuers give the most refunds. Here's an excerpt:

It makes sense that store cards, used exclusively at a single merchant, would be more sensitive to customer complaints than general purpose cards, said Kevin Morrison, senior analyst of retail banking and payments at Aite Group.

“If they’re processing the store credit card, now you have a merchant involved that’s very sensitive about their relationship with the customer,” he said. “If there’s a dispute, the card issuing bank is much more apt to waive the fee.”

On the other hand, the largest card issuers are more likely to depend on automated processes, he said, and have less time for one-on-one hand holding.

 

Commission Structure for CFPB Seems Even Less Likely as Some Republicans Retreat From Calls for It--Though Subjecting CFPB to the Appropriations Process Still a Risk

by Jeff Sovern

Kate Berry has a report at the American Banker, A CFPB commission will never fly, chock full of interesting quotes.  The gist of it is that the Senate Democrats who voted for the bank bill oppose changes in the CFPB and so say they will not support a revised bill if the House were to insist on converting the CFPB to a commission. Meanwhile, some Republicans who formerly supported a commission have cooled to the idea now that a President Trump will get to nominate the next director.  The industry seemingly is steadfast in its support for a commission, though. But efforts to weaken the Bureau by subjecting it to the congressional appropriations process are still alive; that goal could be accomplished by adding a provision to the pending appropriations bill. 

Does Mulvaney Know There's a Difference Between Not Pushing the Envelope and Turning the CFPB into a Dead Letter?

by Jeff Sovern

CFPB Acting Director Mick Mulvaney famously said that the Bureau should not push the envelope. He also said at the same time:

There will absolutely be times when circumstances require us to take dramatic action to protect consumers. At those times, I expect us to be vigorous in our enforcement of the law. But bringing the full weight of the federal government down on the necks of the people we serve should be something that we do only reluctantly, and only when all other attempts at resolution have failed.

* * *

[W]e will be prioritizing. In 2016, almost a third of the complaints into this office related to debt collection. Only 0.9% related to prepaid cards and 2% to payday lending. Data like that should, and will, guide our actions.

So you might think that he would bring the occasional enforcement action, probably against debt collectors.  But he has been in office for nearly four months now, and still hasn't announced any enforcement actions. Not against anyone, much less debt collectors. Apparently there haven't been any times yet when circumstances absolutely require dramatic enforcement action.

Will the Bill to Revise Dodd-Frank Fail Because the House and Senate Can't Agree?

The HIll is reporting that the House insists on going to conference to resolve differences between the House-passed Financial Choice Act and the Senate bill, while the Senate Democrats who supported the bill say they would oppose major changes in it. The House bill makes major changes in the CFPB.

Even Mulvaney's Defenders Struggle to Identify His Accomplishments at the CFPB

by Jeff Sovern

Mick Mulvaney has now led the CFPB for three and a half months and during that period, has been subject to attacks, including on our blog.  Naturally, his defenders are stepping up. For example, Congressman Blaine Luetkemeyer, who chairs the House Financial Services Subcommittee on Financial Institutions and Consumer Credit and served on the Financial Services Committee with Mr. Mulvaney, has penned an op-ed in Roll Call headlined Under Mulvaney’s Leadership, the CFPB Can Finally Live Up to Its Name. It is filled with what I learned in grade school to call glittering generalities and is sorely lacking in identification of actual accomplishments.  Here is the closest Luetkemeyer comes to identifying one of Mulvaney's accomplishments at the CFPB:

Since taking the helm at the CFPB, he has called for a full review of agency activities, a welcome step toward accountability and transparency. Just last week, the agency issued a public request for input on positive and negative aspects of the bureau’s rule-making processes.

Seeking information is useful if you have an open mind, but it's not as if plenty of people were not already weighing in with their opinions on the CFPB's activities, including on this and other blogs.

And what does Luetemeyer think Mulvaney's vision for the Bureau is? Here's another excerpt:

Under [Mulvaney's] direction, the CFPB is moving away from its previous role as a punitive regulatory agency, becoming an advisory and oversight agency with a culture focused on protecting consumers and businesses across the nation. 

There's nothing wrong with the Bureau giving advice, but I don't think that was the main reason Congress created it.  The use of the word "oversight" implies enforcement, but the Bureau still hasn't announced an enforcement action since Mulvaney took over.  Here's another sentence from the op-ed:

The CFPB must become an advisory and advocacy agency delivering well-deserved relief to consumers across the nation.  

What exactly has the Bureau advocated since Mulvaney took over?  And as for relief, the Bureau is still providing relief in cases commenced during former director Richard Cordray's time, but as already noted Mr. Mulvaney himself has yet to bring an new action to get consumers relief.

One final note: if you think I have cherry-picked quotes, go read the piece for yourself and see if you can identify an accomplishment I overlooked. Feel free to post a comment noting the same.

Mulvaney's Evisceration of the CFPB Continues in Multiple Ways

by Jeff Sovern

The CFPB protects consumers in a number of ways. Perhaps the three most important things it does are enforce the law, supervise some financial institutions, and create rules.  A less important mechanism, but still important, is maintaining its complaint database. All of these seem to be coming under attack under Interim director Mulvaney.

Enforcement. As I pointed out earlier this week, Mr. Mulvaney has promised vigorous and consistent enforcement of consumer law, but the CFPB has not announced a single enforcement action in the more than three months he has been on the job--which contrasts strikingly with the numbers of actions his predecessor brought. Instead, Mr. Mulvaney said on Wednesday that the CFPB should let states take the lead on consumer protection. That sounds fine, except it's not what Congress intended when it created the CFPB and gave it enforcement powers. Another problem is that some attorneys general are more protective of consumers than others, for reasons of ideology and resources, and so in some states only the CFPB protects consumers in financial matters (or at least it did before the Mulvaney era). Still another problem is that AGs are not equipped to conduct national actions, unlike the CFPB. While AGs offices do occasionally band together to pursue common goals--sometimes quite effectively--such collectives require coordination among multiple offices, which can be less efficient than having a single office enforce the law. Mr. Mulvaney has also said he wants to use education rather than enforcement.  But serious doubt exists about the efficacy of consumer education. Like disclosure, it may create the illusion of consumer protection without the reality.

Supervision. Yesterday, Mr. Mulvaney reportedly said that the CFPB should take a back seat to the prudential regulators in supervision.  Those would be the same regulators, like the OCC and Fed who were captured by lenders and allowed the disastrous subprime lending that led to the Great Recession. Congress created the CFPB and gave it supervisory power precisely because of the failure of the regulators Mr. Mulvaney wants the CFPB to let drive the supervisory process.

Rules. Rules take a long time to create and so it isn't surprising that the CFPB hasn't announced any new rules under Mr. Mulvaney. But he has said the Bureau may revisit the payday lending rule. 

The Complaint Database. Though less heralded, the complaint database has also been an effective consumer protection mechanism as well as a useful research tool. But the Bureau has just issued a request for information on the complaint database. Nothing wrong with that.  But I fear that the Bureau will use the resulting filings to reduce the information made public, especially as the RFI asks that commenters address that issue (as well as whether more information should be made available).  Given that industry advocates already have compared the Bureau complaint database unfavorably to Yelp, I think we know much of what the industry will say. 

When Will Mulvaney's CFPB Announce its First Enforcement Action?

by Jeff Sovern

Mr. Mulvaney has served as interim CFPB director since November 25, or three months and two days.  The CFPB has yet to announce commencement of an enforcement action during that period, though it has dismissed an enforcement action. For comparison, during 2016, the Bureau brought 42 enforcement actions, meaning that if it had kept up that pace during Mulvaney's tenure, it would have brought ten or eleven such cases.  Mr. Mulvaney pledged to be vigorous and consistent in enforcing consumer law. At least he has kept his promise to be consistent.

Mulvaney's Calendar is Mostly Empty of CFPB Items: "Enforcement Deep Dive" Takes Only an Hour

by Jeff Sovern

The CFPB has posted online Interim Director Mulvaney's calendar for December and January. I can't tell how complete it is, but it has only a fraction of the number of items that former Director Cordray's calendar (also online at the same site) had for the months I randomly selected. Either Mulvaney is doing many fewer things or he is less forthcoming about his activities. I know it's only a part-time gig for him, but this looks like he's working part-time at being part-time.  My favorite item was on December 12 from 1:00 to 2:00: Enforcement Deep Dive.  If a deep dive takes an hour, I would love to know how much time a shallow dive would require. No wonder the Bureau hasn't announced any new enforcement actions. Some blocks of time are labelled CFPB without more information, so it's impossible to tell whether he also attended to enforcement matters during those blocks.  But if all the time he devotes to the CFPB is reflected on this calendar, it is hard to believe he is taking much time to learn about the Bureau or consumer protection. This looks like the calendar of a person who doesn't bother to learn what he's deciding about, which may be part of a pattern.

Zywicki vs. TransUnion

by Jeff Sovern

On Monday, I posted a link to Todd Zywicki's WSJ op-ed in which he accused Cordray's CFPB of pummeling consumers and wrote that "The pain was especially acute for low- and middle-income consumers who lost access to credit cards, faced higher bank fees and reduced access to free checking, and found it harder and costlier to obtain mortgages, especially as first-time homebuyers." It is interesting to contrast Zywicki's view with TransUnion's report yesterday that Consumer Credit Market Concludes 2017 on a High Note which explains that the consumer credit market is seeing a "strong performance across multiple credit products. * * * most indicators point to a healthy credit market * * *." TransUnion reports that auto loans, credit card loans, mortgages, and personal loans are all up by 2.5% to 7.5%. Of course, many factors contribute to increased borrowing, and we can't know what would have happened if there had been no CFPB. TransUnion was speaking about the consumer credit market generally while Zywicki was focused more on low- and middle-income borrowers. Still, the picture Zwyicki painted is very different from the TransUnion's findings.