Why who runs the CFPB should still matter
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Before last week, most Americans would have no response if asked, “Who’s the director of the Consumer Financial Protection Bureau?” And certainly no one, it seems even federal judges, cared too much about how they were appointed either.  And now we know, at least until any pending legal appeal of this decision is possibly launched, that the new director will be Mick MulvaneyJohn (Mick) Michael MulvaneyProtect the Military Lending Act On The Money: Midterms to shake up House finance panel | Chamber chief says US not in trade war | Mulvaney moving CFPB unit out of DC | Conservatives frustrated over big spending bills Warren suggests Mulvaney broke law by speaking to GOP donors MORE as nominated recently by President Trump.

All recent legal maneuvering aside, who runs the CFPB should matter to you. It should matter to all of us, for our financial well-being, and the financial sturdiness of the entire country, stands to be impacted by the actions of this new director.

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The David and Goliath-like relationship between an individual consumer and a large bank is unfair by definition. There is a power imbalance. Banks natural scope, scale and punitive tools make them a determined legal enemy if you find yourself aligned against them. And in a free-market system, banks have a natural drive to achieve market dominance and increase profits. While this can be a strength, it is also a weakness: it is an established fact that the unregulated greed of Wall Street banks led us into the great recession of 2008. They harmed us all. 

Noting this proven potential for individual and collective economic harm, Congress passed the Dodd-Frank Act in 2010. This aligned U.S. financial services regulations with global standards and tightened responsibility and accountability of banks on many levels to improve overall financial stability.  This 2,800-page bill is complex and comprehensive:  but among other things, it established the CFPB at arms-length, as an independent agency to both regulate and litigate against banks which put consumers’ interests in harm’s way. Recent partisan commentary has labelled this agency “a mess”.  But is it really?

From inception, banks collectively despised this agency for its sweeping powers. It interrupted their natural commercial flow and was a more formidable legal foe than an individual consumer lawsuit ever could be. As a result, the CFPB imposes external accountability on banks that individual consumers cannot achieve on their own. They assumed a vigilant regulatory posture defending the little guy, small business owner, and disadvantaged groups. And its success has come at a real cost for the banks it regulates: more than $12 billion dollars in refunds, reversed or revised penalties and cancelled debts for almost 30 million Americans to date. In the Trump era of so-called “fake news” we should ask if those results indicate a mess or a success? 

While this recent legal spat was mostly about who got to be appointed director of the agency and how, that is not really the crux of the matter. The CFPB was deliberately created to be a truly at arms-length agency inoculated from political influence and partisanship that is all too easy for banks to simply buy. To be effective, this agency must be free from political interference. The question citizens must now ask is do they feel this interim director is independent?  And if not, what can and should be done about that?

Obviously, the question of who the interim director is has been settled for now. The more important question ahead is who will be nominated and confirmed by the Senate to become the permanent director and why?  Will that individual be the independent thinker, deft and skilled investigator and a person of character and judgement sufficient for the job? That should be the end-game now – ensuring we hold our politicians to account on a proper appointment.

Nobody, Republican or Democrat, should undermine this agency and its future promise of continued financial protection for consumers. That would be politically scurrilous given the facts. I understand why banks will always prefer to be more loosely regulated and not subject to oversight from agencies like the CFPB. But I also understand why that should not happen: like it or not, banking is more like a utility than it is pure free enterprise, and unbridled capitalism has not ever served consumers well in this sector. Can’t we remain dedicated free-marketers and still accept some sectoral regulatory scrutiny if and when appropriate?

The CFPB, as it is currently structured, is an excellent and effective means of providing consumer protections. My plea: do not let the current partisan bluster involving the brute defense of political power and legal intrigue ever obviate this all-important task.

Dr. James Norrie is the Dean of the Graham School of Business and Chloe Eichelberger Chair for Business Education at York College of Pennsylvania.  He teaches courses in business strategy, cybersecurity, and information privacy and technology law and policy. Reach him at jnorrie@ycp.edu.