In a June op-ed for The Hill, Jeffrey Joseph, a George Washington University professor and a proponent for lax oversight over predatory lenders and Wall Street, deliberately took a written testimony I submitted in 2009 to the House Committee on Financial Services out of context.
Joseph mischaracterized my words, falsely claiming that my organization, the Center for Responsible Lending (CRL), is critical of CFPB’s leadership structure (In my testimony, I was referring to times when there might be a director hostile to consumer protection, and state attorneys general would be a backstop in those circumstances since they also can enforce the CFPB protections.)
I’d like to be clear. The CFPB leadership structure is sound. The agency’s mission to protect consumers from predatory lenders is paramount, and CFPB Director Richard Cordray and his staff have worked tirelessly to keep the financial services industry accountable and transparent to the public.
Joseph also goes on to carry water for the payday lending industry, criticizing the CFPB for limiting the ability of these high-cost lenders to trap low-and-moderate income families in a vicious cycle of debt, and he makes a full-throated defense of a toxic bill called the Financial CHOICE Act — dubbed the "Wrong Choice Act" by opponents — which recently passed the House of Representatives.
The bill aims to rollback consumer protections and safeguards, which were enacted to prevent another financial crisis. The legislation is a gift to predatory lenders. The Wrong Choice Act includes a provision that would bar the CFPB from issuing a rule to regulate payday and car-title lenders or from even enforcing current law to protect consumers from their violations.
Until Congress created the CFPB as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, there was no federal watchdog working to protect people from bad financial actors like the ones that caused this crisis. But thanks to the CFPB and its independent director, much has changed.
The CFPB, under Cordray’s tenure, has significantly improved the lives and expanded the freedom of people across the country, especially in our diverse communities. The CFPB was created as a strong, independent agency with the sole mission of protecting consumers. Since its inception, the CFPB has brought nearly $12 billion in relief to consumers who have been illegally harmed by financial businesses.
Approximately 29 million Americans have directly benefited from this relief. An untold number of other Americans have benefitted as lenders have been deterred and steered away from unscrupulous behavior by CFPB enforcement and supervisory actions.
The bureau has fundamentally changed the mortgage market by cracking down on illegal foreclosure practices, establishing a new standard that requires lenders to verify borrowers’ ability to repay their loans and making the terms more straight-forward and easier to understand. It levied a record fine against Wells Fargo for opening accounts without its customers’ permission, and it is working now to protect families from abusive payday loans and unfair forced arbitration actions.
The CFPB and its director, Richard Cordray, have been effective in promoting a fairer consumer financial market that has companies compete on value instead of engaging in a race to the bottom.
The CFPB has been a vigilant enforcer of civil rights laws and fought against illegal and discriminatory practices; this includes bringing enforcement actions against mortgage, auto loan and credit card companies that charged communities of color more than similarly-situated white customers. The CFPB has also swung its doors open to the American people, helping them to resolve disputes with and stop abusive practices by banks and other lenders.
Moreover, many in the industry have lauded Director Cordray’s performance. Even last year’s short-lived decision by a panel of three D.C. Circuit Appeals Court judges in PHH v. CFPB, the court called Cordray “a man of substantial accomplishment and of longstanding and dedicated devotion to public service and the public good.”
On this, I should note that this panel’s decision, which Joseph cites for his argument, has been vacated by the full D.C. Circuit Court as it considers the case. This is merely one of his many disingenuous arguments. Joseph also likely knows that the CFPB has significant limits to its power, something I have also testified on.
Instead of resorting to hyperbolic rhetoric about tyranny, Joseph should consider the experience of consumers that have had their freedom constrained by financial companies that send them down an unending pit of debt and despair, deny them their day in court through mandatory arbitration clauses, hound them for debts they don’t owe, deny prepaid card users access to their own funds, or foreclose on responsible homeowners because of deceptive fine print or falsified documents.
If the CFPB is undermined, this will signal that it is once again open season on consumers. It could also cause yet another painful economic crisis.
Under Cordray’s direction, the CFPB is fulfilling its mission of protecting consumers. We can’t afford to lose this level of leadership or diminish the role that the CFPB plays every day to support everyday, hardworking Americans.
If the 2008 financial crisis showed us anything, it’s that consumers need a strong and independent regulator to look after the interests of consumers.
Michael Calhoun is president of the Center for Responsible Lending, a research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices.
The views expressed by contributors are their own and not the views of The Hill.