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