Trump CFPB Appointees Use COVID-19 Crisis as Rationale to Weaken Consumer Protection

By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.

As a long time observer of American politics, I must give reluctant credit to Republicans for the skill with which they play the game. The COVID-19 crisis provides ample opportunity to practice their talents.

A recent article in Politico, Consumer bureau draws fire for pro-business tilt during crisis caught my eye.

This area joins policies on immigration, environmental protection, judicial selection, corporate legal liability, and fossil fuels among the many areas in which the Trump administration and its willing minions follow the advice of former Chief of Staff Rahm Emmanuel, “You never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before.”

And boy, the COVID-19 pandemic provides such a crisis.

As Politico tells the story:

The Consumer Financial Protection Bureau [CFPB]  is relaxing rules designed to shield Americans from abuse during the coronavirus crisis, saying the moves are necessary to give businesses flexibility during the pandemic.

“The CFPB under President Trump has used this pandemic as an excuse to weaken protections for consumers — enabling predatory lending, watering down credit reporting protections and fair lending laws, and making it easier for credit card and debit card companies to rip off their consumers,” Senate Banking Committee ranking member Sherrod Brown (D-Ohio) told POLITICO.

COVID-19 Increases Opportunities to Commit Ripoffs

Now, readers will not be surprised to hear that the COVID-19 pandemic has created unprecedented opportunities for the unscrupulous to practice financial crime.

Yet that tendency has not been matched by a willingness by the CFPB’s leaders to pursue and prosecute the fraudsters:

Yet the coronavirus crisis has underscored the dangers that Americans face from financial crime: A record number of consumer complaints have already been filed with the bureau — more than 42,000 in April alone, greater than in any other month since it opened in July 2011. The Justice Department recently brought its first fraud charges related to a small business lending program. More will follow.

The bureau, for its part, has not brought a single enforcement case during the crisis, and its enforcement actions fell by 80 percent from 2015 to 2018, according to an analysis by the Consumer Federation of America. Its staff has been reduced by more than 14 percent under President Donald Trump, and the agency is filled with political appointees to keep an eye on the career employees.

U.S. PIRG drills down on the repercussions of COVID-19 for consumer complaints:

As the House considers the next coronavirus funding bill, the Heroes Act, an analysis by U.S. PIRG of recent complaints to the U.S. Consumer Financial Protection Bureau (CFPB) shows an alarming need for Congressional action to protect consumers from the pandemic’s repercussions ….

Key findings in U.S. PIRG’s analysis include:

  • Credit reporting complaints have always historically topped the list, but these types of complaints increased by more than 20,000 in April, double the monthly amount from 2018.

  • Of the complaints that include written explanations (optional narratives) and mention the pandemic, mortgages and credit cards were the most complained about.

Yet the agency’s response to these COVID-19 inspired trends is to soften its consumer protection policies ,rather than strengthen them, according to Politico:

In March, the agency announced that it would relax or postpone various reporting requirements for mortgage lenders, credit card companies and other financial institutions. Kraninger said the move would allow financial companies “to focus their resources on assisting consumers” rather than on complying with CFPB rules.

Last month, the bureau issued guidance signaling that it would not enforce a requirement that credit reporting companies review consumer disputes within 30 days and would instead consider the companies’ “good faith efforts to investigate disputes as quickly as possible.”

US PIRG calls out these policies in pungent terms:

In addition to supporting these provisions (Sections 110401 and 110402) of H.R. 6800, U.S. PIRG is calling on the CFPB to enforce consumer laws, instead of repeatedly telling banks and other firms it will give them flexibility to ignore the rules. Meanwhile, despite merely offering consumers money-saving tips and advice, the agency is continuing down a path to repeal payday lending protections and issue a report recommending changes to consumer laws being prepared by a Task “Farce” of lawyers and academics, all of whom have worked on behalf of the financial industry.

Mixed CFPB Legacy

Republicans are not alone in their distaste for vigorous consumer protection measures.  I have not  forgotten the role Trump’s predecessor played in hamstringing the CFPB, the brainchild of Elizabeth Warren, who conceived the idea of  the agency during her tenure as a Harvard law professor. He failed to nominate her as the original head of the agency, even though she was the obvious choice, and instead settled for Rob Cordray, who dilly dallied on implementing  policies, delaying both the mandatory arbitration rule and payday lending rule so long that each was overturned by invocation of the Congressional Review Act once Trump was president and Congress firmly under Republican control.

To her credit, Senator Warren recently denounced the CFPB’s performance during the COVID-19 crisis. Again according to Politico:

Sen. Warren, a Massachusetts Democrat who spearheaded the effort to set it up the bureau after the financial crisis, accused Kraninger of spending her 17-month tenure “making it easier for consumers to get ripped off.”

“The CFPB has a crucial role to play during this crisis to protect families,” Warren said in an email. “It must use its supervisory authority to monitor and detect consumer abuses and use its enforcement powers to punish companies that violate the law.”

She warned that “Congress will be watching — and I will use every tool available to me to hold the agency accountable to its mission.”

Hmm, I wonder what that will look like? Well, one response, from Corday:

The target of many of those criticisms, former CFPB Director Richard Cordray, says there’s plenty more the agency could be doing for consumers. Cordray released a white paper last month detailing 16 actions the bureau could take, from using its supervisory authority to make sure lenders comply with the mortgage relief measures contained in the $2 trillion economic rescue package Congress passed in March to pressuring financial firms to waive overdraft fees.

Alas, too little, too late. He squandered some of the real chance he had to implement meaningful, timely consumer protections when he headed the CFPB.

I think it unlikely that the agency will promote a strong consumer-friendly agenda as long as Trump is President and has instead opted to promote business priorities.

And – shudder – what about under presumptive Democratic nominee Joe Biden? Will anything meaningful change?

I fear not.

One only need  look to what the CFPB didn’t do the last time a Democrat was in the White House


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    1. ambrit

      I would cut Warren some slack and observe that Warren is first and foremost a Technocrat, and a PMC to boot. Her political skills are lacking. She should have moved to protect her “baby” earlier on, but did not have the experience to notice when the real danger appeared. Obama scuttled the CFPB barque right quick, he did.
      If I were religious, I would sleep soundly knowing that ‘O’ will be sharing an office with the likes of Reagan down in H—. Both have shown themselves to be empty suits, devoid of self-regard and honour.

  1. ambrit

    This degradation of the CFPB is a perfect example of the Ultra Right tactic of degrading a Bureau and then attacking that same bureau for not being able to do it’s job, and thus move on to dismantling said bureau. A wholly constructed self fulfilling prophecy.
    I’m waiting for the “Grand Bargain” to be put forward in earnest. Then we will see true Civil Disturbances. The trick there will be to convince the younger cohorts to make common ground with the oldsters. Convince the youngsters that their futures and old ages are at risk from a Grand Bargain, and we will be getting somewhere.
    The destruction of the CFPB is but the tip of the spear for the Revanchists.

    1. a different chris

      The forces of evil play a long game – the youngsters have been long convinced that “there won’t be Social Security” for them for reasons and they accepted it.

      But the beauty of youth is in it’s ability to grasp and run with new ideas, and also old ideas revived. To turn on a dime. My 20-somethings are walking around with vinyl records, for god’s sake. That isn’t going to save us, but the attitude behind it will.

      This latest generation seems to play with the BS that my generation swallowed, like a cat plays with a mouse. We’ve given them almost nothing to lose, and that is way dangerous to the status quo.

      1. ambrit

        We have similar experiences. Cynicism looks to be the default setting for most 20-somethings I interact with now.
        The real danger to the elites from ‘creating’ a mass underclass is that there are always going to be something approximating what Marx and Engels called the ‘Vanguard of the Proletariat.’ These younger cohorts can still remember when Mom and Dad had a much better life than that facing them. All that anger and frustration is powerful fuel for whatever fire some demagogue decides to ignite. The problem for the demagogues to deal with is that mass movements often develop a “mind of their own.”
        At the front of a mass movement parade is most dangerous. That mob will run you over in a heartbeat, sometimes your last one.

      2. Sue inSoCal

        Thank you – I’ve been saying this for a while, particularly to a good friend who has completely given up. Push this too hard, there will eventually be a push back.

  2. John

    The Consumer Financial Protection Bureau [CFPB] is relaxing rules designed to shield Americans from abuse during the coronavirus crisis, saying the moves are necessary to give businesses flexibility during the pandemic.
    That is arrant nonsense. How does abusing you customers provide flexibility? Are they in competition for The Ebeneezer Scrooge Award?

    1. ambrit

      No. Scrooge repented his evil ways. More likely the Jacob Morley “Rattling Chains of Title” Award.

  3. lyman alpha blob

    “Congress will be watching — and I will use every tool available to me to hold the agency accountable to its mission.”

    Is there anyone in Congress who isn’t a complete tool? And yet somehow nothing gets fixed and things only get worse…

    Maybe if Warren hadn’t stuck the knife in Sanders’ back, there would have been some small chance of improvement. But hey, an A+ for mouthing platitudes, Lizzie.

  4. bob

    Another Spectacular Display of Government Collusion with Big Banks: Specialized Loan Servicing Pays $1.25 Million for Failing to Comply with RESPA on $112 Billion in Claimed “Loans”
    Posted on May 19, 2020 by Neil Garfield
    The consent order requires SLS to pay $1.275 million in monetary relief to consumers in the form of redress and waiver of borrower deficiencies, pay a $250,000 civil money penalty, which will be paid to the Bureau and deposited into the Bureau’s Civil Penalty Fund, and implement procedures to ensure compliance with the Real Estate Settlement Procedures Act (RESPA) and its implementing regulation, Regulation X.
    A copy of the consent order filed with the Bureau is available at:
    I continue to be infuriated by regulators who now know the extent of illegal collection, administration and enforcement of transactions with homeowners. The entire industry that calls itself “servicers” is mostly comprised of a fully paid, indemnified coverup of false claims leading to collection of money and forfeiture of homes that are admittedly wrongfully foreclosed but the agency refuses to require the players to undo false, illegal and fraudulent foreclosures.
    The Bureau’s investigation found that since January 2014, SLS violated RESPA and Regulation X by taking prohibited foreclosure actions against mortgage borrowers who were entitled to protection from foreclosure, and by failing to send or to timely send evaluation notices to mortgage borrowers who were entitled to them. These violations also constitute violations of the Consumer Financial Protection Act of 2010. In some cases, SLS’s violations of Regulation X short-circuited the protections against foreclosure for consumers whose homes were ultimately foreclosed upon. [e.s.]
    So if you want to know why this is happening, look in the mirror. You are a voter. So if you don’t vote for people who are likely to require enforcement of our laws to protect consumers and homeowners, you are part of the problem.
    And if you are not interested in being part of a homeowners association that defends and lobbies for laws that strengthen protection for homeowners, you are allowing this to continue. One way or the other, it will visit your doorstep. It will be either in the form of your own home or the effects of someone else’s problem that reduces the valuation of your home.
    Think I’m overstating? Google “mortgage meltdown” or “2008 financial crisis.” Or better yet Google history of “TARP” where the definition went into constant change mode. Get the facts. Then decide for yourself based upon facts.

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