Who will protect consumers from the CFPB

It is the most powerful agency you have never heard of, and it should be catapulted to the top of the growing list of federal agencies under scrutiny for abusing their authority. The behavior of the Consumer Financial Protection Bureau (CFPB) is not a rehash of the NSA or IRS scandals; it is bigger and it is time people took notice.

Cloistered in the Federal Reserve, this secretive agency has perhaps the broadest mandate of any government agency, yet the least amount of oversight.  It has the power to regulate virtually every financial product offered in the nation.  From mortgages to credit card transactions, the agency wields a power that can change the way every American banks, shops, obtains a loan, accesses education, and manages their personal finances. 

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It was created to presumably protect consumers from the unscrupulous practices of banks and other bad actors in the financial services industry.  Their charge is to investigate financial institutions and non-bank entities who offer financial products then promulgate regulations and create enforcement actions to address practices the CFPB deems unfair or fraudulent. 

Driving the agency’s work is Director Richard Cordray and a core group of staffers from both President Obama and Senator Elizabeth Warren’s campaign teams. One senior advisory board member is even the former vice presidential nominee of the Socialist Party of the United States.  Many of these folks have a substantial political pedigree but little experience in financial services. 

Developed purposefully by the Dodd-Frank legislation to be outside the purview of Congressional budget oversight, the CFPB need only answer “no comment” anytime Congress wants answers.  However, the American must people demand transparency from a regulatory agency with the ability to have an enormous impact on our economy and personal freedom. 

The public, elected officials, and the press have been excluded from nearly all CFPB meetings, conferences, and events except for a few carefully staged public hearings.  Revelations have also recently come to light about internal protocols instructing staff to manage their information in such a way as to prevent it from being subject to FOIA requests. 

In just the last year, the bureau has come under fire for collecting consumer behavior data from more than 1 billion credit cards.  It recently pushed Democrat Senators to try and squash the testimony of whistleblowers from within its own ranks about alleged discriminatory practices.  Testimony later accused Director Cordray of calling a Black employee to pressure her to call off her attorneys when she claimed discrimination was rampant throughout the agency. 

The CFPB also was exposed for paying an audience member at a hearing to deliver a pro-CFPB message. All of this has come to light under the backdrop of the “independent” agency spending $150 million to renovate its headquarters, conveniently located across from the White House.

The CFPB has been repeatedly accused by Members of Congress of acting in secret, going beyond its mandate and covering up its behavior.  It is an example of when you give government an inch it takes a mile. 

The agency’s mandate is so broad and lacks any semblance of real accountability that it has now blurred the line between regulating fraudulent industry behavior with the regulation of consumer behavior.  This has been highlighted by a recent report that appears to suggest the bureau is going to limit the frequency by which consumers can take out payday loans.  This type of unbridled authority can create a regulatory ripple effect that will hit industries of all kinds and the personal freedom of every American. 

We have seen this movie before.  When an agency goes to such lengths to stay in the shadows, Americans should question the legality of its activities. 

We should view the CFPB’s much-discussed efforts to regulate the short-term loan industry as but a test case for how the Bureau’s regulations could impact a range of other industries.  Perceived as being an easy target, the payday loan industry provides the CFPB with the perfect guinea pig.  The industry has done little to manage the perception that it takes advantage of its largely low-income, minority customer base. 

The CFPB’s new rules for payday lenders, which are expected to be unveiled this Spring, could sound the death knell for the industry.  If they do they will be regulating out of existence a legal industry that provides products to millions of Americans who like them, need them, and use them.  They’ll do it without an act of Congress.  How can that be constitutional?  What industry or practice will be next?

The assumption of the CFPB regulators is that consumers need the government to perform the financial equivalent to a detox, freeing them from the consequences of their actions.  Consumer choice, individual financial freedom, and the free market will bear a price for such an arrogant presumption. 

The CFPB is turning into the little mouse that roared. It is time for the elephant (or donkey as the case may be) to stand up for consumers and squash it. 

We cannot allow the government to regulate consumer behavior as a way of regulating an industry’s behavior. It is time for consumers, businesses, and anyone who values the American free-market economy to demand refuge from damaging intervention in the name of consumer protection that is being perverted into a powerful weapon.

Bezas is executive director of the United States Consumer Coalition.