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April 7, 2017

Rich Cordray: Facing a Meritless Industry Legal Challenge and Mislabeled “Reform” Proposals Designed to Weaken It, the CFPB Continues to Fight For and Protect American Consumers From Wall Street’s Illegal, Predatory Actions

With Wall Street’s biggest firms — and Goldman Sachs in particular — setting the agenda, it is no surprise that the Consumer Financial Protection (CFPB) is in the cross-hairs of the Trump Administration and Republicans in Congress.  Because it is a powerful and fearless for financial consumers, Wall Street and its allies love to hate the CFPB and their so-called “reform” proposals are just Trojan Horses intended to gut or kill this agency.

It is undeniable that the CFPB is an incredibly effective cop on the Wall Street beat for all American consumes of financial products.  Although only created in 2010 when the Dodd Frank financial reform law was passed, it has already returned more than $12 billion to more than 26 million Americans who have been ripped off by financial firms.  That’s $12 billion back in the pockets of America’s families, rather the illegally paying for the bonuses and profits of banks and bankers.

Nevertheless, the Trump administration has sided with Wall Street and the country’s largest financial firms against Main Street families to kill the CFPB.  For example, in the middle of March, the Trump Justice Department filed an amicus brief in the D.C. Circuit Court of Appeals on the side of industry and against the CFPB and every consumer protection organization in the country.  The administration and the industry are asking the court to throw out one of the strongest structural protections for the CFPB: the requirement that the Director can only be fired for cause and not just replaced on a whim with an industry-friendly non-regulator. 

Last week, 39 current and former members of Congress, including the creators of the agency — former Senator Chris Dodd and former Representative Barney Frank — filed an amicus brief in the case in support of the CFPB, focusing on the structure of the agency:

“In creating the bureau, lawmakers determined that it needed two key attributes to fulfill its mission: independence, and the ability to act promptly and decisively in response to new threats to consumers. These requirements counseled in favor of an agency led by a single director, to avoid the delay and gridlock to which multimember commissions are susceptible.”

With this legal fight looming in the background, the House Financial Services Committee held a hearing on Wednesday on “The 2016 Semi-Annual Reports of the Bureau of Consumer Financial Protection,” with Director Cordray as the sole witness.  Wall Street’s political allies on the Committee repeatedly hammered the Director with baseless political attacks, often giving him no opportunity to respond and not listening to the responses when he could make them. 

Attempting to create a “for cause” reason for the President to fire the Director, Republicans ignored the CFPB’s impressive successful record and made wild, laughable allegations to try to smear the agency as derelict or deficient.  Such “alternative facts” may cheer Wall Street, but none would withstand the most cursory scrutiny of an independent federal judge.  One-sided, baseless, ideological allegations are not valid reasons to fire someone for cause.

The other attacks on the CFPB focus on two areas: changing the structure of CFPB by changing it from a sole-directorship to a five-person commission like the SEC or CFTC (in addition to allowing the President to fire the Director without cause, i.e., for political preferences which would politicize the bureau and consumer protection).  The other idea focuses on making CFPB subject to Congressional appropriations.  Currently, funding for the CFPB comes from the Federal Reserve, which is also independent of the Congressional budget process.  Subjecting it to the annual Congressional appropriation process will enable Wall Street, it’s lawyers, lobbyists and allies to cripple the agency by inadequately funding it to do its job. 

These ideas are huge mistakes and are intended to neuter the CFPB and put American consumers at the will and whimsy of the same greed and lack of basic protections that led to the 2008 financial crisis.

To grasp the folly of putting placing a five-person commission atop the CFPB need look no further than the partisan gridlock and, at times, warfare at the SEC and the CFTC.  Altering the structure of the CFPB would assign it the same tragic fate.  Similarly, one need look no farther than the CFTC’s budget and its current enforcement woes to see the dangers of subjecting the CFPB to the Congressional appropriations process.  The CFTC has been crippled by the gross underfunding and that is what Wall Street wants to do to the CFPB as well.

We should also not forget that the CFPB was in the lead investigating and fining Wells Fargo for its egregious, years-long, illegal practice of ripping off millions of their customers through opening bogus accounts.  After the CFPB’s investigation into Wells Fargo, it levied a $100 million fine, its largest ever.  Without the CFPB, Wells Fargo could very well to this day still be opening sham accounts in their customers’ names and bilking them for overdraft and other fees on these accounts that generated millions for the bank and pain and suffering for American consumers.

This is exactly why the CFPB was created: protect American consumers of financial products, go after the financial crooks and make them pay for their rip offs.  Don’t listen to those claiming to want to “reform” the CFPB.  It’s working amazingly well and as intended, to protect consumers not Wall Street profits and bonuses.   



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