We No Longer Have a “Consumer” Finance Protection Bureau

It’s actually hard to keep track of all the ways in which Donald Trump and his administration work to protect giant companies instead of consumers. A good place to start, however, is by looking at what Trump and his cronies are doing to the Consumer Finance Protection Bureau (CFPB).

The CFPB came into being because of the Great Recession. In the face of mounting foreclosures and increasingly high-interest rates, among other factors, President Obama realized that an agency was needed specifically to focus on the protection of consumers, rather than banks or monetary policy more generally. In 2010, Congress passed the Dodd-Frank Act and that Act created the CFPB. It’s the only money-related agency in the federal government whose sole purpose is, as the agency itself states, to “[watch] out for American consumers in the market for consumer financial products and services.”

With such a strongly-worded and clearly framed statement of purpose, you’d think it would be evident the CFPB’s job was to make sure that consumers are protected against the rapaciousness, dishonesty, and general low-level scumminess of banks and other financial institutions. In the Trump era, of course, you’d be wrong.

The CFPB has been in the crosshairs of Republicans for a long time thanks to its aggressive watchdog approach. The hate makes sense, because when you’re bought and paid for by the big banks, as Republican elected officials are, you’re definitely going to hate increased regulation.

A few months ago, the CFPB was a hot topic of discussion when Trump named his Office of Management and Budget (OMB) Director, Mick Mulvaney, to head the Bureau. (There’s still a legal battle raging over this, because it isn’t clear if Trump or the outgoing CFPB director, Richard Cordray, are allowed to name someone to run the agency.) Mulvaney has called the CFPB a sick, sad joke, so he’s the perfect choice to run the CFPB, because in Trumpland, it is perfectly normal to have agencies run by people who loathe the mission of those agencies.

In a weird twist, Trump is now considering tapping Mulvaney for the job of Chief of Staff if he decides to boot John Kelly, which is just another signal that neither Mulvaney nor Trump believe that running the CFPB takes any time at all. And why should it, when Mulvaney didn’t even bother to request any funding for the bureau for 2018?

The failure to fund isn’t the only way in which Mulvaney is seeking to undermine the mission of the CFPB. RIght out of the gate, he imposed a hiring and regulation freeze, essentially ensuring the bureau remains in a holding pattern. He’s called for bureau employees to display “humility” where the interests of enormous financial institutions are concerned, and he issued a classic corporatist cry: banks are people too.

We are government employees. We don’t just work for the government, we work for the people. And that means everyone: those who use credit cards, and those who provide those cards; those who take loans, and those who make them; those who buy cars, and those who sell them.

Imagine having endured the last decade and thinking that the institutions that really need protections are big banks.

Mulvaney appears to have spearheaded an expansion of the mission of the CFPB, if the new language on Bureau press releases is any indication. Once, the language referred to “help[ing] consumer finance markets work by making rules more effective [and] by consistently and fairly enforcing those rules”—which is hardly a call for a socialist revolution. Under Mulvaney, Bureau press releases now carry this language:

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by regularly identifying and addressing outdated, unnecessary, or unduly burdensome regulations, by making rules more effective, by consistently enforcing federal consumer financial law, and by empowering consumers to take more control over their economic lives.

No one really hears of bank consumers complaining of “unduly burdensome” regulations. That’s pretty much a sadness reserved for the banks. Moreover, given that the CFPB came into being precisely because consumer financial markets were wildly under-regulated, this “new” CFPB represents the real stance of Mulvaney and Trump: all regulation is too much regulation.

This becomes incredibly clear when you look at CFPB’s recent rollback of rules on payday lenders. Under Obama, the CFPB took steps to increase regulations on payday lenders by requiring those lenders to determine, prior to making the loan, whether people could afford to pay the loan back. The rules also restricted the ability of payday lenders to repeatedly hammer someone’s bank account with debit attempts, which can lead to increased bank fees and, possibly, account closures when too many fees are incurred.

If you’re not familiar with payday loans, you should know that they target poor people and veterans, tending to cluster in poor neighborhoods and near military bases. Interest rates can be upward of 300 percent. In theory, you borrow just enough to get you to your next paycheck—hence the name. However, the business model of payday lending relies upon people not being able to pay the loan back quickly—there’s just not enough profit in that. So payday lenders continue to roll the loan over or pay additional fees to renew the loan, and that’s how they make their money.

The rules the CFPB imposed on payday lenders were modest, and there was robust bipartisan support for increased regulation in that market. Of course, payday lenders hated the new rules and aggressively lobbied the Trump administration to reverse the rule. Mulvaney was more than happy to do so. He’s long been a friend of payday lenders, including taking money from one of them, World Acceptance Corporation, in earlier election cycles. It just so happens that World Acceptance Corporation, which routinely issued loans with interest rates as high as 182 percent, had been under investigation by the CFPB since 2014, but that investigation was dropped, absent explanation, in January 2018.

World Acceptance Corporation isn’t the only winner here. Under pressure from the payday lenders, Mulvaney killed the regulations entirely. How will those lenders celebrate? By having their annual retreat at the Trump National Doral Golf Club, of course.

Remember that big Equifax breach? The one where the personal data of 145 million consumers had their data compromised? And not just any data: names, social security numbers, addresses, credit card numbers, driver’s license numbers, email addresses—all of this data was accessed by hackers. Equifax didn’t handle it well at all. It turned out that the breach was likely thanks to a vulnerability that Equifax left unpatched for two months. Equifax executives also sold $1.8 million worth of stock after they learned about the breach, but before they told the rest of the world about the breach.

Because of the scope of the breach and all of Equifax’s missteps, the CFPB ordered an investigation into the matter back in September, before Mulvaney took over. CFPB has the tools to investigate a breach like this, but Mulvaney isn’t interested in doing so. He hasn’t subpoenaed anyone at Equifax and recently quashed a plan to test how Equifax protects its data. The CFPB even turned down assistance from other regulators who offered to help. 145 million consumers have their data compromised, and the agency designated to investigate just that sort of thing seems to have no interest in doing so.

Under the Trump administration, you can expect a lot more of this. The proposed 2019 White House Budget makes large cuts to CFPB funding. The CFPB just released its five-year strategic plan, and it no longer looks like it is interested in protecting consumers at all.

The Bureau will now focus on equally protecting the legal rights of all, including those regulated by the Bureau, and will engage in rulemaking where appropriate to address unwarranted regulatory burdens and to implement federal consumer financial law and will operate more efficiently, effectively, and transparently.

So it is banks, not people, that need protecting, and the rule-making that will happen is to decrease the regulatory burdens on the exact entities the CFPB is supposed to oversee.

None of this should really be surprising, but it is still disheartening. It’s a return to the habits that gave us the Great Recession in 2008, after we had let subprime loans run amok. It’s a return to the sort of loose regulation of smaller financial institutions that gave us massive bank collapses in the 1980s. It’s a return to pre-New Deal thinking, where we didn’t care about consumers at all. Finally, it’s a return to the pre-Depression era, where banks were largely unregulated. None of these things worked out very well for consumers, but they all worked out very, very well for the very, very rich, and that’s who Donald Trump, Mick Mulvaney, and all their ilk care about.