Requiem For An Agency

I am not usually the sort of person who gets misty-eyed about federal regulatory agencies. But I will miss the Consumer Financial Protection Bureau. It was the one part of the U.S. government that seemed sincerely committed to taking on corporate wrongdoing. It wasn’t perfect, but it actually helped people, which is more than can be said for many other parts of the federal bureaucratic octopus (see, e.g., the Pentagon).

I’m speaking of the CFPB in the past tense, but strictly speaking, of course, it does still exist. Many fine people continue to work there. But now that Donald Trump has succeeded in appointing a CFPB head who believes the agency a “sick, sad joke” and said of himself “I don’t think anyone in this administration is more of a right-wing conservative than I am,” it seems unlikely that the agency will be doing much “consumer protection” or financial regulation from now on. Mick Mulvaney quickly made it clear that his CFPB will be taking a new direction: he began stuffing the agency with loyal Republicans, and reworked the agency’s mission statement, which went from emphasizing the enforcement of rules that protect consumers to “identifying and addressing outdated, unnecessary, or unduly burdensome regulations.” A fellowship that previously honored crusading consumer attorney Louis Brandeis was renamed after property rights champion Joseph Story instead. But those were just warning signs. Now we’re seeing the escalation of the effort to stall the agency’s work: the CFPB dropped an existing lawsuit against payday lenders who had charged 950% interest rates, without offering any explanation for not continuing to pursue the case. The agency has invited “public comments” on its enforcement practices, which sounds good, but in practice will be a way for the financial industry to complain about excessive regulation, allowing the CFPB to reduce its enforcement and claim to simply be responding to the wishes of the “public.” And Mulvaney has requested an annual budget for agency operations of exactly $0.

It’s painful to watch the Trump Administration strangle the CFPB, just as it’s painful to watch them throw out environmental protections and regulatory oversight of nursing homes that kill their patients. And yet, when it comes to the CFPB, I’ve often felt just as much frustration at Democrats, who never really bothered to make the case for the agency to the public. Nobody has really stepped up to explain what it did and why it’s important. When Trump appointed Mulvaney after the resignation of Richard Cordray, criticism was focused on an obscure (and highly debatable) legal issue about the scope of presidential appointment power. Instead of substantively criticizing Trump for preparing to undermine the CFPB’s work, and trying to build understanding of and support for that work, Democrats issued procedural criticisms that were unlikely to gain much traction with the public (who probably have a hard time understanding why the president wouldn’t be free to appoint the head of an executive agency).

I’d like, then, to set aside the unbelievably boring and legalistic questions about agency independence that have dominated media coverage of the CFPB. Instead, it’s worth doing what Democrats have consistently failed to do: explain and defend the CFPB’s record. I want to tell you what it has actually done, why it’s important, and why I’m so deeply pained watching Republicans tear it to shreds, and infuriated that I don’t see Democrats on television constantly telling people what they are going to lose when the CFPB becomes inert and ineffectual.

The best way to begin to understand what the CFPB does, or did, is to take some time and browse through the agency’s website. Have a look at its list of enforcement actions, most of which never make the front pages. Look into the facts of the cases and see what we’re actually talking about here. A few choice examples:

The National Collegiate Student Loan Trusts were suing thousands of borrowers, attempting to collect on debts that (1) the NCSLT could not actually prove it owned (2) were often outside the statute of limitations for collection. The NCSLT was even filing false affidavits, in which witnesses swore that they had personal knowledge of consumers’ accounts when they didn’t, and faking proper notarizations. Thanks to the CFPB’s enforcement action, the trusts had to stop filing lawsuits on debt they couldn’t actually prove they owed, had to repay money, and had to submit all of their loans to an audit to ensure that people weren’t being harassed over debts that they didn’t actually owe.

The CFPB won a judgment against Morgan Drexen, a company that supposedly offers to help people with debt relief. The company flat-out lied to people, claiming “that consumers will not pay upfront fees for debt-relief services, when, in reality, they typically pay hundreds, if not thousands, of dollars in upfront fees,” and claiming “that consumers will be ‘debt free in months’ when, in fact, only a tiny fraction of consumers who work with the company ever become debt free.” The CFPB got consumers $130 million in restitution for the misrepresentations that bilked people in financial trouble out of even more of their money.

Oh my God, just look at this one : the CFPB is litigating against a company that “offers advances to consumers entitled to payouts from victim compensation funds or lawsuit settlements.” According to the CFPB’s complaint, the company concocted an “illegal scheme [that] deceived 9/11 first responders with cancer and other illnesses and football players with brain injuries out of millions of dollars by luring them into costly advances on settlement payouts with lies about the terms of the deals.” Essentially, the company makes money by trying to get people to sign over chunks of their payouts in exchange for an up-front sum, and this company allegedly tried to siphon huge amounts of money away from NFL concussion victims and 9/11 responders by tricking them into thinking they were getting a good deal.

CitiFinancial and CitiMortgage were fined nearly $30 million for a whole host of deceptions that made life miserable for borrowers, including: failure to comply with legal requirements and inform consumers of their foreclosure relief options, prematurely canceling consumers’ credit insurance resulting in the denial of their claims, misleading borrowers about when new interest from deferred payments would come due, sending wrong information about consumers to credit reporting agencies, and failing to respond to consumers who complained about the incorrect information being sent to credit reporting agencies.

The CFPB sued the giant mortgage servicing company Ocwen for illegally foreclosing on 1,000 homeowners, failing to tell borrowers how much was due on their loans, failing to credit their payments, signing consumers up for add-on products without their consent, bungling the management of accounts in ways that caused people to overpay, and failure to respond to complaints despite receiving nearly 600,000 “notices of error” and complaints from more than 300,000 borrowers.

The CFPB sued Navient , the largest student loan servicer in the country, for a host of illegal acts, including: (1) disregarding borrower instructions for how to apply their payments, resulting in the misapplication of funds, which they then refuse to correct (2) steering borrowers into costlier repayment options thereby charging billions of dollars in interest that consumers could have avoided if they hadn’t been misled (3) failing to inform borrowers about deadlines for renewing their repayment plans, meaning that many missed the opportunity to renew their enrollment (4) misreporting the credit information of severely disabled veterans

Here’s another truly outrageous one: The CFPB sued All American Check Cashing , which engaged in the sleaziest type of outright fraud, refusing to even tell consumers how much the will be charged and lying to customers who try to cancel or reverse a transaction. From the CFPB’s account:

All American instructs its employees to hide the check-cashing fees by counting out the money over the fee disclosure on the receipt and removing the “receipt and check as quickly as possible.” All American’s policies explicitly forbid employees from disclosing the check-cashing fee to consumers, even when directly asked. A training presentation for new employees instructs them to “NEVER TELL THE CUSTOMER THE FEE.” Employees are directed to say they do not know what the fee will be, and to deflect consumers’ questions with small talk and irrelevant information so that “they are overwhelmed with info.” … When consumers ask to cancel or reverse a check-cashing transaction after learning the fee, All American employees sometimes lie and say that the transaction cannot be canceled, even when that is not the case.

The CFPB put a stop to the actions of “ Student Loan Processing, Inc. ” a scammy company that charged student loan borrowers exorbitant up-front fees and recurring monthly fees in exchange for questionable services and without proper disclosure.

The CFPB got Honda ’s financing division to pay $24 million in restitution to minority borrowers who were given higher dealer markups and loan payments than their white counterparts. (No, the increases were not the results of differing creditworthiness.) The same again with Toyota , who were also charging minority car-buyers higher rates. Both companies had to put in place new practices to ensure the elimination of discriminatory lending practices.

This is just a sample from the CFPB’s record of enforcement actions. But enforcement through lawsuits is only part of what the agency does. Another major component is “supervision”: day-to-day oversight of companies that offer financial products to make sure they are following acceptable practices that serve the interests of their customers. I doubt that the CFPB’s quarterly Supervisory Highlights report is one of America’s most popular coffee-table periodicals. But have a browse through the archives. It is not the most thrilling read, but you’ll find dozens of explanations of how the agency is making sure lenders and servicers do various things like: eliminate erroneous accounting, approve all valid applications, serve non-English speaking customers, eliminate unlawful redlining practices, ensure that no false representations are made to customers, make sure that repossessed property is properly returned when borrowers have paid, eliminate hidden and unlawful “convenience” fees, handle disputes adequately, collect data properly, and make timely disclosures. (I’m just drawing from a single Highlights report.) Enforcement actions may have provided significant relief for consumers when harms have been done, but ongoing CFPB supervision ensures that plenty of harms never end up occurring in the first place. (Alas, this makes the benefits of their work more difficult for ordinary people to see.)

Here’s another incredibly important piece of the CFPB’s work: the Consumer Complaint Database, which has dealt with nearly 1 million individual complaints from customers about their treatment by financial services providers. When the CFPB gets a complaint, it contacts the company and tries to get a resolution: according to the agency, 97% of companies provide timely responses once contacted by the bureau. Just have a read through some of the consumer narratives in the database. Some of them are heartbreaking: people who are ill, confused, and desperate, but are being pursued by agencies over charges they don’t understand, being given the runaround by call center operators and being sent billing statements that are never explained. You can see, in the database, a window into the reality of ordinary people’s financial lives in America: constant bills, constant paperwork, constant dealing on the phone with people who can’t tell you anything about your account and are telling you the opposite of what the last customer service person told you. The credit agency won’t remove a debt from your report that belongs to someone else. The lender says you’re 30 days late on your payment when you literally just sent them proof that you had made the payment on time. Thousands of dollars in new fees keep appearing without explanation, and no matter how much you pay they keep telling you that you owe more. For all of these people, the CFPB is there to do what nobody else will: listen, try to figure out what’s going on, and try to get a response or solution from companies that are unresponsive and whose only interest is in bleeding you of your every last cent.

The database is also critically useful from a research perspective. All of its data is publicly available, and it can be used by scholars and attorneys to figure out which kind of bad practices are recurring and which companies have disproportionate numbers of complaints. It doesn’t just help the individuals who file the complaints, but the future individuals who can be served when the CFPB identifies and addresses patterns of wrongdoing.

The CFPB also does in-house research itself: have a look through its 2015 study on arbitration agreements, or its 2013 study on overdraft fees. There are all kinds of findings here that are useful for policy-makers. For example, the CFPB’s research shows that very few consumers are aware that they have agreed to arbitration that take away their right to sue over wrongdoing, and “less than 7% of consumers whose credit card agreements included pre-dispute arbitration clauses stated that they could not sue their credit card issuers in court.” Arbitration clauses violate the sensible principle that contracts should be a “meeting of the minds,” i.e. for a contract to be valid both parties need to know what they have agreed to. In reality, consumers have no idea what they have agreed to, because companies intentionally bury information in legalistic fine print and decline to help customers understand it. The arbitration study found that these contract clauses were “effectively blocking billions of dollars of relief for millions of harmed consumers” by limiting their ability to collect from companies that had wronged them. The overdraft fee study, too, is rich with insights: service charges have, since the 1980s, become a huge source of revenue for banks, who make tens of millions of dollars from overdraft fees. These are marketed to consumers as overdraft “protection,” but account-holders are frequently unaware they can opt out, and end up being hit with enormous overdraft fees unexpectedly.

The CFPB has used this research in order to promulgate new rules for the financial services industry. Its arbitration agreements rule restricted the use of arbitration clauses to deny relief to consumers. That rule was, predictably, eliminated by Donald Trump and congressional Republicans. Other new CFPB policies have survived. A rule on payday lending requires lenders to make an actual effort to ensure that consumers can pay the loans they are being given, to avoid getting them stuck in the infamous neverending payday lending debt trap. (Of course, the Trump Administration is almost certain to kill the rule, since conservatives see nothing wrong with trapping consumers in neverending debt traps, and consider usury to be a core part of the American Dream.)

The CFPB has also substantially overhauled mortgage servicing rules to provide greater consumer protections. (Read about all the new benefits!) When you read these rules, most of them seem like things that should obviously be law, but before the CFPB stepped in, companies routinely violated them. For instance, servicers are now required to “have policies and procedures in place to provide delinquent borrowers with direct, easy, ongoing access to employees responsible for helping them.” They have to provide clear monthly statements that actually tell borrowers what they owe, and they have to warn borrowers before their interest rates are adjusted. They must provide delinquent borrowers with a “written notice that includes examples of options that might be available to them as alternatives to foreclosure.” They can’t proceed with foreclosures when a borrower is still in the process of applying for a loan modification, and they have to consider all possible alternatives to foreclosing on someone’s home before proceeding with foreclosure. Another new rule consolidated and simplified the disclosure requirements for new mortgages, making sure that consumers “understand the key features, costs, and risks of the mortgage loan for which they are applying.”

The CFPB has also produced practical financial literacy material that is widely used by Legal Aid and social workers in order to help disadvantaged people sort out their finances. The “Your Money, Your Goals” guides and toolkits provide a wealth of clear and simple information on dealing with debt, managing your spending, and setting long-term goals. They teach people how to avoid exploitation, and supplemental material deals with the particular financial challenges faced by certain populations like the elderly and disabled. There are worksheets, videos, booklets, and guides to help practitioners actually use the worksheets, videos, and booklets.

Altogether, the agency has directly gotten consumers approximately 12 billion dollars (think about just how much money this is), including nearly $4 billion in direct monetary compensation and nearly $8 billion in “principal reductions, cancelled debts, and other relief.” 29 million people have received relief as a result of CFPB actions, meaning just under 1 in 10 people in the whole country. It’s kind of unbelievable that so little attention has been paid to this vast transfer of money back into consumers’ pockets.

Conservative critics of the CFPB often see this as precisely the problem: they say that the agency is using its power to extort financial services providers over questionable violations. The numbers horrify them rather than impressing them, because these critics view this money as rightfully belonging to the financial institutions that consumers paid it to. But examine the facts of the cases we’re talking about. Consumers often have very little power or knowledge when they are dealing with large financial institutions. If those institutions mislead them, by telling them that they need to make a higher payment than they actually have to make, or by telling them that they will be better off with some add-on product that actually does nothing, the ordinary customer has very little way to figure out whether they’re being lied to.

Furthermore, even if a company does something small, like giving a credit agency wrong information, a consumer may have to spend hours on the phone navigating endless layers of bureaucracy in order to get it fixed. Financial services providers can make your life absolutely hell, charging you piles of fees that you didn’t know existed and that you had never been told about, and then resisting every effort to get the situation explained or addressed. Ordinary people have full-time jobs. Strong laws about what institutions need to tell borrowers exist so that people don’t have to waste half their life trying to figure out whether there was some kind of better repayment program they could have enrolled in if they’d ever been told about the application deadline. Without the CFPB, companies will lie to people about what they owe and what their options are, and they will be powerless to do anything except hand over more of their meager wealth to a faceless institution. Critics of CFPB enforcement often put words like “unfair” and “abusive” in quotes, as if the agency is punishing perfectly ordinary business conduct. But read through the facts and imagine yourself as a borrower trying to figure out what the hell is going on with your account. We need strong federal oversight of the financial industry so that we can get on with our lives without worrying about whether we’re being lied to and scammed.

Conservatives are ideologically opposed to the core part of the CFPB’s mission, because that mission is based on a premise that committed defenders of free markets reject. They believe that the market should be left to its own devices, and have little sympathy for people who complain at being mistreated by companies. After all, you signed on the dotted line: tough shit, buddy. Of course, often these companies are actually in violation of the contracts that they signed with consumers, but since free-market conservatives actually believe far more strongly in protecting corporate power than enforcing contracts, that doesn’t alter their belief that a federal “consumer watchdog” agency should be opposed on principle. Ultimately, even if lenders are making lives hell for poor people, and even if they are doing so in violation of the agreements made by their representatives with those poor people, Republicans are still never going to defend anything that grants federal power to fight banks on behalf of consumers.

There are plenty of criticism made of the CFPB. Most of them are grounded in ideology rather than fact: for every new rule, the financial industry and its political allies will scream that it is a “crippling burdensome regulation” that will “hurt the people it’s trying to help” and “strangle growth and entrepreneurship.” This is not because they have carefully and neutrally evaluated the facts, but because they believe all federal oversight of what lenders do to customers is crippling and unfair, since it prevents them from doing what they want to do, i.e. siphon money away from ordinary people by plunging them further into debt. You would think that anyone who believes in the efficient operation of markets would strongly support, say, disclosure rules that ensure people know what they are buying before they buy it. After all, if they’re not getting what they think they’re getting, the transaction isn’t creating mutual benefit. But few people who rave about the magic of markets actually support ensuring that those markets are serving people well, because what they actually believe in is making sure rich people are as free as possible to amass greater and greater wealth.

Because most of the CFPB’s actions are useful and defensible, but admitting this would require one to abandon a belief in unfettered markets, right-wing critics often attempt to distract from a clear evaluation of the benefits of the agency by making charges against the agency that are irrelevant to whether it helps consumers or not. Have a look at conservative ex-CFPB attorney Ron Rubin’s National Review article laying out the “tragic” failures of the CFPB (conservatives often use the word “tragic” in going after progressive policies, because they want to insist that they Really Care And Are Just Sincerely Concerned And Are Just Pointing Out Harsh Realities That They Wish Were Otherwise.) You’ll see that Rubin throws everything at the agency he can find: it was stuffed with anti-corporate Democrats (no shit), it mistreated its black employees, it had an unfair internal hierarchy in which Ron Rubin’s opinions were given insufficient weight. There are some substantive criticisms thrown in, but they are anecdotal accounts of a case or two in which Rubin feels a corporate client was given insufficient opportunity to rebut the charges against it. (Without noting, of course, that the CFPB’s enforcement actions are subject to oversight from the court system.) Likewise, all the attention given to the fight over who heads the agency helps distract from a core question: what has the CFPB actually done, and has it been good? You can believe that the agency acts unlawfully and exceeds its authority, and insist that you are making a criticism of its structure rather than its policies. But then the question is: assuming they exceeded their authority in order to do things that were useful, shouldn’t we now grant them that authority so that they can keep doing useful things? The CFPB is constantly criticized for “overreach,” but even if you buy that argument, then the correct response to the overreach is for Congress to grant the CFPB greater powers so that its useful actions will no longer be overreach. (Nevertheless, I cannot help but suspect that the vehemence with which the CFPB’s overreaches are denounced has a little something to do with the fact that it is harming big business rather than consumers. Prosecutorial overreach that harms, say, poor black men never seems to get the same level of denunciation from the American right.)

Federal agencies are boring. Disclosure requirements for mortgage servicers are boring. I can see why a lot of what the CFPB does isn’t considered sexy, and I’ll confess that I only read a small portion of the 700-page arbitration study before falling asleep on my desk. But while much of what the CFPB does isn’t sexy, we’re all much better off in a world with it than we would be in a world without it. I wish Democrats would evangelize for it more and explain to people precisely what they stand to lose. The Trump Administration believes in its heart that businesses should free to fleece and mislead people as much as they like. Donald Trump himself has spent his whole life doing exactly this. And as the administration further erodes the powers and resources of the CFPB, more and more people will find themselves without recourse when their financial institutions screw over, lie to, steal from, and betray them.

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