The Consumer Financial Protection Bureau is now the star of a strange legal and bureaucratic drama, a power struggle between Rome and Avignon that takes place one block from the White House. The resignation of the director of the office, Richard Cordray, has created a battle of succession of tailored soap operas for the frenzied cycle of news of Washington, with two officials in mourning claiming their work and furious supporters who defend both parties. President Donald Trump's tweet on Sunday criticizing the CFPB as "a total disaster" received more attention than anything the office has done in its six years of existence. So did the donuts that Trump's election as acting director, White House budget chief, Mick Mulvaney, brought to his first staff meeting in the office.
But with much less fanfare, the office has done a lot since President Barack Obama and Congress The Democrats created it in response to the 2008 financial crisis. It has cracked down on predatory lenders, sleazy intermediaries, Debt collectors and Wall Street scammers, forcing financial firms to return $ 12 billion to 30 million scammed consumers. It has helped transform the mortgage market, the credit card industry and other moving companies that used to enjoy lax or non-existent government oversight. Its database of consumer complaints, online and public searches, has helped more than one million disgruntled financial customers to obtain corporate responses, while serving as a kind of Yelp administered for monetary reasons.
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In its six years of existence, the CFPB has discreetly established itself as the most powerful and consistent new federal agency since the Environmental Protection Agency opened its doors almost half a century ago. In the process, the office has provoked a fierce retreat by financial lobbyists and Republican leaders, who have portrayed it as a rogue Soviet-style bureaucracy and Cordray as an inexplicable dictator. Several federal judges have also beaten the office for overstepping its authority, reinforcing critics who accused it of launching an ideological crusade without law to overthrow Big Finance.
Mulvaney is one of those critics; After his first day as acting director of CFPB, he criticized his new workplace as "a terrible example of a bureaucracy that went wrong" and announced that it was freezing all new hires, regulations and fines. And no matter who wins the battle of legitimacy of the moment between Mulvaney and the temporary successor chosen by Cordray, Leanne English, Trump will eventually get to choose a permanent director who will surely drive radical changes in the office. "The elections have consequences for all agencies," said Mulvaney, who won the first round of the fight in court in front of a judge appointed by Trump.
It is difficult to predict what those consequences will be, now that the mortgage crisis that started the office is no longer fresh in the public mind, and its critics are on the rise in Washington. A federal judge ruled last fall that the director of the CFPB had such "enormous executive power" that the structure of the agency violated the Constitution, a ruling that is now on appeal.
But regardless of the outcome of that case, those appointed by Trump may not find it. It's so easy to remodel the office that those appointed by Obama have had to mold for six years. The CFPB director of Trump will be his only political representative in an agency with 1,600 professional employees (although he will eventually have more). Those employees were recruited by Obama's directors, first a liberal law professor named Elizabeth Warren, who devised the agency and directed it during its initial phase before running for the Senate in Mbadachusetts, and then Cordray, the first and only director in occupy the post permanently. Their employees tended to share their belief in aggressive consumer protection. They wanted to help the new sheriff clean up the Wild West.
"The people who come here really feel the mission," Cordray said in an interview with POLITICO earlier this fall, before announcing his resignation.
Cordray is not a type of crusader who hits the fist like Warren, who initially hired him to lead the agency's application division. He is a monotone from the Midwest, a clumsy introvert who resembles inmate Kenneth of 30 Rock and seems to be about to ask permission to finish his reflection. But he made it clear, while discussing his mandate, that he had stretched that "enormous executive power" as far as possible to protect consumers from scams. He did not apologize for the unsuccessful efforts of the bureau to curb faraway objectives such as university creditors and payment processors, the legal setbacks he attributed to a conscious strategy to push the envelopes to curb the kind of financial shadow that helped shatter the global economy. A decade ago
"I never had any qualms about telling our people, if we have a case involving things that people really should not have been doing, presenting the case, correcting the error, and if a judge tells us we can not, well "said Cordray. "There are many bad things that need to be addressed, and we should not shy away just to have a perfect record of defeats."
Politically, the defeats of the court office have reinforced the industry's arguments that the office itself needs to restrain the arguments, Trump and his aides are echoing as they try to reduce their regulatory intensity. But Cordray was trying to build a lasting institutional culture, and he often told his team that he did not want to run the kind of agency that wins all the fights.
"That means you're moving away from the gray areas, keeping away from the line, it means you're not willing to be aggressive and take risks," said Cordray. "If you lose from time to time and they call you excessive excesses, that probably means you are reaching the proper limits of your authority."
Office advocates warn that Trump and other Republicans only want to disembowel him on behalf of corporate donors who do not want a tough policeman in the financial arena, even though Trump promised to fight Wall Street during his populist campaign. There is some truth in that. Banks are enjoying record profits, and the mortgage market is healthy and growing. But critics say the agency is basically a progressive consumer advocacy group with virtually unlimited power to write rules, issue citations and collect fines, as if Public Citizen or Consumer Union had carte blanche to target and punish companies that do not they liked. There is also some truth in that.
The legal fight over the future of the CFPB began on Cordray's last day in office, when he ventured into another gray area to try to put his chief of staff, English, in charge of the office until Trump could Get a permanent director confirmed. But the political struggle will continue long after the legal dispute is resolved. The White House is clearly eager to dismantle a pocket of liberal resistance within Trump's Washington, although polls suggest that the public overwhelmingly supports the bureau's work. It has only existed for six years, but its first leaders have tried to do it dismantling proof.
"We thought long and hard about this," recalls Raj Date, the agency's first deputy director. "We wanted to build something that would last."
The CFPB owes its existence to a 2007 article that Warren wrote for the magazine Democracy arguing that consumers needed a federal agency to regulate defective mortgages the way the Consumer Product Safety Commission regulates faulty toasters. Many regulators had at least some responsibility for consumer protection, but it was not the top priority for any of them. The Wild West mortgage chaos that fueled the financial implosion of 2008 made Warren seem prophetic and elevated his academic idea of a new agency to the top of the political agenda.
But he changed his mind about a point in his article, concluding that the agency should be headed by a single and powerful director instead of a bipartisan commission. The contemptuous Federal Electoral Commission and even the Securities and Exchange Commission had convinced her that the government by committee would not produce aggressive supervision. A fellow Democrat recalls warning him that a single director would be risky. With a commission overseeing the agency, it would still have some pro-consumer Democratic influence during an anti-consumer Republican administration, but with power concentrated on one nominee, the agency would be more vulnerable to savage pendulum changes after each change in leadership . She responded that with a new agency, it was more important to have total control from the beginning.
"He said, the key is to train the agency from the beginning with people who are committed to like-minded people," says the Democrat, who now works in an industry that deals with the office. "I wanted to create a lasting culture."
During the post-crisis debate on the reform of Wall Street, shutting down the idea of an independent consumer agency was the number one priority of the financial industry, and commercial interests covered Congress with lobbyists and political donations that the Consumer advocates can only fantasize. But Obama's White House and Democratic leaders refused to budge, in part because they thought that cracking down on shoddy mortgages and other scams would be the only part of the Wall Street reform that ordinary Americans could understand. They engaged in how to regulate derivatives, how to do away with failed megabanks and other complex reforms, but in reality they strengthened the office's mandate during the legislative process, giving it broad powers to draft and apply rules, keeping its funding out of the political process, and put a single leader in charge.
The initial leader was Warren, who quickly began hiring related talents such as Cordray, who had just lost a re-election campaign for the Ohio Attorney General, and Date, a Wall Street investment banker who had launched a group of experts in consumer finance. She brought Holly Petraeus, a veterans advocate whose husband David was a decorated general, to supervise veterans' affairs, and Gail Hillebrand, advocate of Consumers Union, to direct consumer education. An official in the office recalled receiving annoying criticism for reading an early regulation of CFPB mortgages by Diane Thompson of the National Center for Consumer Defense; A few months later, Thompson became the chief lawyer in the CFPB's regulatory office. There were former leaders in the corporate industry such as Capital One and Nextel in top leadership, too, but only those who expressed enthusiasm for the mission.
Ron Rubin, a Republican who worked in the office in its early days and later became a critic, complains that its top leaders used "mission-driven" as a euphemism for "liberal," filling their ranks with the supporters of Obama. And whether the office had a political test of fire or not, it certainly had a political aura. Warren used to gather his team outside the agency's elevator bank and give pbadionate speeches about the importance of being a voice for the voiceless, and chase down the corporate thugs who had cheated with impunity for too long.
"It was very inspiring" Holly Petraeus says. "She talked about how the free market does not regulate itself, and finally we were going to take care of the people who were scammed in. There is a life cycle in the agencies, and we wanted to be creative and innovative right away, before we started to become bureaucracy. "
The office quickly began to develop new financial road rules, beginning with regulations cracking down on the scant subscriptions and direct fraud that helped propel the mortgage crisis. He also launched a series of investigations, often aimed at industry leaders to maximize the impact on the rest of the industry. His first enforcement action imposed mbadive fines against several of Wall Street's biggest giants, whose call centers had tricked customers into buying credit. monitoring and other unnecessary "add-ons" to your credit cards. A former official compared the approach with a new prisoner who wants to project resistance on his first day inside, so he fights with the biggest bully in the prison yard.
"We wanted to send a message: There is a new policeman in the rhythm," he recalls. "Pushing the envelope is a loaded phrase, but that's exactly what we did."
There was a big scandal when Obama appointed Cordray instead of Warren to be the permanent director of CFPB in July 2011. And after the Republicans said they would not confirm Cordray or anyone else, there was another big scandal When Obama gave him a recess in January of 2012. Cordray did not receive much national attention again until he resigned last month, most likely he ran for governor of Ohio, but in all accounts he continued pushing the envelope and selecting fights with bullies Suppressed mortgage fraud, foreclosure scams, deceptive mortgage servicers, illegal overdraft charges, payday loan debt traps, deceptive debt collectors, fraudulent prepaid cards, predatory student loans, Bad credit reports, unauthorized wireless charges and other tricks that separates Americans from their cash. He went in search of giants like Wells Fargo for opening unauthorized checking accounts, Navient to direct student loan borrowers in unattractive options, and Citi for giving mortgage borrowers the opportunity. The financial leaders have shouted, but he considers his opposition as a badge of honor.
"It comes with the territory," said Cordray, who is expected to seek the Democratic nomination for governor of Ohio. "When you do things that create changes and entangle the focus of some people, because they can not get away with what they used to get away with, you're going to gain your share of resistance."
But part of that resistance has come from judges who have reprimanded the office for overstepping their authority. A judge blocked the bureau's effort to investigate the for-profit diploma mills by citing its accreditation agency, dismissing it as a "fishing expedition" and sarcastically rejecting the bureau's claim that the accreditor had somehow a role. in student loans: "Please". Another judge dismissed the feeble case of the bureau in front of a processor of internal payments and complained about his "deliberate omission of the court's instructions", citing a pattern of obstruction that included a CFPB witness in a deposition reading of a sheet of tricks for more than an hour to answer the question
The final defeat of Cordray was the repeal of Congress of its "forced arbitration rule", which would have ensured that consumers could sue financial firms before the courts in instead of being locked in mandatory arbitration proceedings. He even wrote a letter begging Trump to veto the bill, to prevent American families from being "cheated with their hard-earned money and left defenseless to defend themselves." But despite campaigning as a populist, Trump has ruled as a corporatist, and blithely signed the derogation from lobbyists of Republican banks and lawmakers, while venting on Cordray's hostility to business.
Congress can override another Cordray rule by shaking up the high interest payday loan industry. But financial leaders say that their true hope for the Trump era in the office is a less antagonistic approach to supervision and compliance. They would also like to see Mulvaney eliminate her public sight complaint database, so that companies are no longer accused of accusations without due process. They say that the CFPB's aggression has made consumer credit more expensive and less efficient, forcing lenders to invest in lawyers and compliance officers and then transfer the costs to their clients.
"There is such a complicated mentality," says Richard Hunt, the head of the Consumer Bankers Association. "You will not find a single bank that does not at least double its compliance costs, if it does not triple or quadruple, people pay for it."
But one thing one does not hear from financial leaders is that the CFPB should be abolished, even though they once warned that its creation would paralyze financial services in the United States. The Wall Street Reform Act of 2010 transferred more than 18 consumer protection laws to the authorities of seven federal agencies to CFPB, and it is hard to imagine how they could be transferred back. Critics complain about the way the office is structured and its contradictory approach to business, but no longer clamor for its demise.
"Now that he's here, he's here to stay," says Alan Kaplinsky, a lawyer representing numerous companies that have battled the office. "He has too much power and does not always allow the facts to get in his way." But nobody is really suggesting that it should be dismantled any more. "
Even Mulvaney promised that the Trump Administration will keep the CFPB in business." Rumors that I am going to set fire to the place or blow it up or close the doors are completely false, "he said on Monday. anyone who is waiting for the status quo to continue "is simply being naive." Clearly, envelopes will no longer be pushed for corporate offenders.The authorities will no longer stretch out in the name of giving voice to those without voice.The unfinished rules about Overdraft fees and abusive debt collectors may well remain unfinished.
But the office still has 1,600 employees, and most of them are determined to stay with the mission long after the fury dissipates over who is A CFPB official predicted that while Mulvaney and his eventual successor could block new progress in consumer protection, it will be difficult for them to undo much part of the progress that has been made in the last six years.
"We're just going to keep doing our job," the official said.