The wolves of Wall Street are out. What do they want? The CFPB.
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Emboldened by a preliminary court decision declaring that the Consumer Financial Protection Bureau (CFPB) — created in the wake of the 2008 financial collapse to protect consumers against bankers, debt collectors and payday lenders — is unconstitutional, President Trump and the wolves of Wall Street are encircling the embattled agency for the kill.

If they succeed in their long shot quest to shutter the doors of the consumer protection agency, cling tightly to your wallet, for anyone with a bank account, credit card, home mortgage, personal loan, or student loan will once again be left to fend for themselves against financial predators.

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The CFPB is a young agency, but under the leadership of former Ohio Attorney General Richard Cordray, it has become the mouse that roared. In the five years of its existence, the agency returned to 29 million Americans about $12 billion in savings or direct payments from dubious financial institutions.

 

The consumer protection agency was created as part of the Dodd-Frank Act in 2010 to protect consumer interests against banks and lenders. Other financial agencies had pieces of the consumer protection puzzle, but no agency had been explicitly focused on protecting consumers from Wall Street. Too often agencies like the Federal Reserve were in bed with the biggest bankers.

To protect everyday consumers, the Consumer Financial Protection Bureau was created as an independent agency responsible for consumer protection in the financial sector and tasked with promulgating regulations, enforcement actions, and the creation of a groundbreaking consumer complaint database to do so. Like most independent agencies, its director is protected against removal at will by the president.

The CFPB cracked down on many of those responsible for the financial crisis in which millions of Americans lost their jobs and homes and trillions of dollars in household wealth. The bureau, for example, levied a $100 million fine against Wells Fargo for creating fake bank accounts in the names of 2 million unsuspecting customers. It ordered Bank of America, Citibank, and JPMorgan Chase to pay back hundreds of millions of dollars to customers for services never received.

CFPB also ordered TransUnion and Equifax to return $17.6 million to customers for luring people with false promises into costly recurring payments for useless credit-related products. It halted a student loan debt relief scam that illegally tricked borrowers into paying additional fees for student loans and misrepresented itself as part of the Department of Education.

Wall Street doesn’t like this agency one bit. But with its severely tarnished public image, the financial institutions could grumble, although there wasn’t much they could do about it. This year however, two new developments dramatically altered the scene. One was a recent court ruling that the CFPB is structured unconstitutionally. The other was Wall Street finding a new best friend in the White House.

Director Cordray of the consumer protection agency ordered PHH Corporation, a mortgage company, to pay $109 million in fines for what he claimed to be ill-gotten mortgage reinsurance premiums. PHH sued, challenging both the fine and the very existence of the bureau. In a 2-1 decision, a panel of the D.C. Circuit Court nullified the fine and also ruled that the Dodd-Frank law that says the CFPB Director may only be removed for cause by the president violates constitutional separation of powers principles. In essence, the court demoted Director Cordray so that he could now be fired at will.

Cordray is safe for the time being as the case is on appeal to the full court, with Public Citizen in support of Cordray and the agency as amici. But the initial ruling emboldened Wall Street to pressure the White House and congressional Republicans to roll back consumer protections. Trump picked up Wall Street’s mantle, issuing several executive orders calling on Congress to weaken bank regulations and the president seems poised to fire Cordray. Some congressional Republicans are also attempting to weaken or even abolish the agency by legislation.

The arguments against Director Cordray are weak. Removal only “for cause” is an important protection for independent agencies to be truly independent from White House politics. It is a protection afforded to many independent agencies, including the Fed, the Nuclear Regulatory Commission and the Consumer Product Safety Commission, among others.

Just as importantly, Wall Street has shown no sign of learning from its past mistakes. The Wall Street culture is to seek what is good for itself: profits. Risky behavior can produce enormous profits. A recent study found that nearly half of Wall Street operatives believe their competitors did something unethical or illegal to make lots of money, more than a third of the bigger professionals said they have “first hand knowledge” of such behavior, and a quarter of financial professionals admitted they would take advantage of insider trading if they were guaranteed not to get caught.

Wall Street still embodies a culture of greed that usually is not in the consumer’s interest. We cannot allow that culture to go unchecked. This is no time to roll back Dodd-Frank regulations or to undercut the critical new consumer watchdog that is protecting us from that culture.

Craig Holman, Ph.D., is a government affairs lobbyist for Public Citizen, where he serves as the organization’s Capitol Hill liaison on campaign finance and government ethics. He previously worked as a senior policy analyst at the Brennan Center for Justice at New York University Law School. He assisted in crafting and implementing the original ethics executive order implemented by the Obama administration.


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