Consumer Law & Policy Blog

Another Name, McWatters, NCUA Head, Said to be on Shortlist to Direct CFPB

So says Victoria Finkle in the American Banker. Other names reportedly on the list are House Financial Services Chair Jeb Hensarling, GMU professor Todd Zwyicki, and Keith Norieka, the former acting head of the OCC who threw a monkey wrench into the CFPB's doomed arbitration rule.  McWatters currently helms the National Credit Union Administration, and was confirmed by the Senate for that position.  When it comes to regulatory capture, the article contains a particularly interesting paragraph:

[McWatters's] nomination may draw opposition from banking groups, however, which are concerned with how close the NCUA is to the industry it regulates. Bankers frequently complain that the agency is not tough enough on credit unions.

As for McWatters's interactions with the CFPB, the article explains:

He asked the consumer agency in May to exempt credit unions from expanded data collection and reporting requirements issued under the Home Mortgage Disclosure Act and to clarify the agency’s authority to oversee unfair, deceptive and abusive acts. In July, he requested that the consumer agency drop examination and enforcement for the largest credit unions.

Why Did the CFPB Eliminate Fair Enforcement of the Rules From Its Description of Itself?

by Jeff Sovern

As others, including Adam Levitin and David Lazarus have pointed out, the CFPB recently modified its description of itself at the bottom of its press releases.  Here is the old version:

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.

And here is the new version:

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by regularly identifying and addressing outdated, unnecessary or unduly burdensome regulations, by making rules more effective, by consistently enforcing federal consumer financial law and by empowering consumers to take more control over their economic lives.

The motivation for some of the change seems clear.  The Trump administration is anti-regulation, and "addressing" regulations is consistent with that. But why the change from "consistently and fairly enforcing [consumer protection] rules" to "consistently enforcing federal consumer financial law" (emphasis added)?  What's wrong with fairness?  Here's what David Lazarus had to say:

Because the rules that banks and credit card companies had to follow were unfair to begin with? Because consumers shouldn’t expect fairness when dealing with financial firms? 

For what it's worth, I wonder if it has something to do with the use of the phrase "fair lending laws" to refer to laws, like the Equal Credit Opportunity Act, that prohibit discrimination in lending. Or maybe it's because the use of the word fair implies some exercise of discretion, as in the laws won't be enforced when that would produce an unfair result.  Or maybe the Trump administration believes the CFPP should not have the authority to declare practices unfair.  Recall that the House of Representatives has passed the Financial Choice Act, which would eliminate the Bureau's power to outlaw practices as unfair, deceptive, or abusive (the UDAAP powers).  

And why the change from "rules" to "federal consumer financial law"?  Is it simply a stylistic change? Or is it intended to reflect a substantive shift from making rules to focusing on enforcement of statutes?

What about using a 20th century saying for dealing with this 21st century statement: if it ain't broke, don't fix it.

LA Times Report on Hearing on PI Motion in English v. Mulvaney, the CFPB Leadership Case

The story is headlined Trump's Wells Fargo tweet cited in court hearing as reason to remove Mulvaney as CFPB acting chief.  The tweet said

Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped, as has incorrectly been reported, but will be pursued and, if anything, substantially increased. I will cut Regs but make penalties severe when caught cheating!

Here's an excerpt from the story:

The attorney for Leandra English — the bureau’s deputy director who has said she is the rightful acting head — said Trump’s tweet showed he was trying to exercise improper influence over the independent consumer watchdog.

“I think that [tweet] shows you this isn’t just some hypothetical concern,” the attorney, Deepak Gupta, told Judge Timothy J. Kelly of the U.S. District Court for the District of Columbia during a nearly two-hour hearing.

* * * 

Gupta argued Friday that English was suffering irreparable harm by not being acting director and that harm also extended to Americans because Mulvaney is taking a different approach to consumer protection than she would have.

“You cannot unscramble the egg of having the wrong person running the Consumer Financial Protection Bureau,” Gupta told Kelly. “This is not a garden-variety employment case.”

Gupta said that Congress established the succession provision in Dodd-Frank to ensure that the bureau would not be subject to presidential influence. Mulvaney should be removed as acting director because he also serves in the White House at the pleasure of the president, Gupta said.

District Court Hearing on Friday on English PI Motion for Control of CFPB as White House and Treasury are Said to Fight Over the Bureau's Role

The American Banker''s Kate Berry has a report on the hearing here; it is not optimistic about English's chances. Meanwhile, the WSJ has a story headlined The Internal Divide Behind Trump’s Takeover of Consumer Watchdog about how White House conservatives want to dismantle the Bureau while the Treasury sees a role for the Bureau. Mulvaney's appointment is seen as a victory for those who oppose the Bureau.

Does Cancellation of the Debt Collection Notice Survey Mean Lawmaking in the Dark Has Come to the CFPB?

by Jeff Sovern

Advocates for some positions sometimes block the federal government from researching or supporting research on issues. For example, supporters of gun rights have long had the votes to prevent the government from obtaining data about gun safety.  See, e.g., Newsweek's report titled THE GOVERNMENT WON'T FUND RESEARCH ON GUN VIOLENCE BECAUSE OF NRA LOBBYING. What appears to be a similar ethos made headlines recently when it was reported that the Center for Disease Control and Prevention had barred the use of words like ''evidence-based" and "science-based" in budget documents.  Now that spirit may have come to the CFPB. Earlier in the year, the CFPB had sought to conduct a survey of consumers on debt collection notices. The Dodd-Frank Act gave the CFPB the power to issue regulations interpreting and implementing the Fair Debt Collection Practices Act, something no other agency has been able to do, and as the statute is four decades old, has rarely been updated, and predates modern communications methods such as cell phones, emails, texts, or even fax machines, while referring to telegrams, it is badly in need of corresponding regulations. One area which particularly needs work is debt collection notices, and the CFPB survey would surely have helped determine how to make those notices effective. A survey I co-authored found serious problems with a widely-used debt collection notice, and the Bureau could have tested other notices to see how to make them more useful to consumers. But the new leadership at the CFPB has withdrawn the Bureau's proposed survey. I very much hope that this is merely a pause in the Bureau's effort to learn about debt collection notices, and that the Bureau later conducts the survey. That may in fact be what happens because the withdrawal notice reports that the "Bureau leadership would like to reconsider the information collection in connection with its review of the ongoing related rulemaking." But I fear that this is another example of how evidence-based lawmaking is no longer in vogue and that the pause will never end.

Trump Tweet Demonstrates That CFPB No Longer Independent of White House

by Jeff Sovern

The tweet reads: 

Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped, as has incorrectly been reported, but will be pursued and, if anything, substantially increased. I will cut Regs but make penalties severe when caught cheating!

If the CFPB continued to be independent, as Congress intended when it created the Bureau, the president could not "make penalties severe" for violation of rules the CFPB enforces. That would be up to an independent CFPB and the courts. The president's tweet emphasizes that having the CFPB run by someone who reports to the president in his other job--OMB director--undermines the legislative goal of having an independent agency protect consumers. 

Paul Bland on Possible Nominees to Head the CFPB

Here.

The Sovietization of the CFPB?

by Jeff Sovern

The old Soviet Union assigned political officers, called zampoliti, to military units to monitor the units for political correctness, as the Soviets defined it, among other purposes. According to an American Banker article authored by Kevin Wack, Mulvaney's plan to embed political staffers in CFPB sparks backlash, the purported Acting CFPB Director, Mick Mulvaney, is contemplating a similar course. Here's an excerpt:

For "every major branch of CFPB - enforcement, rulemaking, education, legal, maybe somebody in the Northeast division, somebody in the Southeast division, somebody out West," Mulvaney said he would "try to marry that branch's senior staffer ... up with a political position."

Congress designed the CFPB to be an independent agency in the mold of the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Federal Reserve Board. Those agencies typically have far fewer political appointees than other parts of the executive branch.

At the OCC, the only political appointee is Comptroller Joseph Otting, a spokesman said Tuesday. Members of the FDIC's board are political appointees, but the agency has just one additional political staffer, according to a spokeswoman. And the Federal Reserve Board has no political staff appointees, though its board members are confirmed by the Senate.

If Mulvaney trusted the CFPB staffers, it is hard to see why such actions would be needed. What a shame that an agency which has been so effective at protecting consumers is being treated in such a fashion.

 

December 22 Hearing on PI Motion in English v. Mulvaney

The National Law Journal has the schedule here. If granted, the motion would presumably be in place until entry of judgment. 

Times Report on How Mulvaney is "Defanging" the CFPB

Here.