Beyond leadership tiff, what's at stake at consumer watchdog

Since the housing crisis and recession, consumers have been able to turn to the Consumer Financial Protection Bureau for help with problems with their financial institutions. That assurance could soon fade.

The CFPB is the federal government's consumer watchdog agency for all things financial: checking accounts, credit cards, payday loans, debt collectors, etc. It exists to make sure customers are not being exploited and that banks are complying with the consumer protection laws on the books. Proponents of the agency say that before the crisis there was no one regulator to turn to when things got bad in the mortgage market.

The bureau was thrust into a leadership crisis last week when the CFPB's outgoing director elevated Leandra English to interim director, while President Donald Trump chose his own person for the role — White House budget director Mick Mulvaney. A court ruled Tuesday in favor of the White House, declining to grant an emergency restraining order requested by English to stop Mulvaney from becoming acting director.

Mulvaney, and whoever becomes the permanent director, is almost certain to be friendlier to financial companies than previous director Richard Cordray. Trump says the CFPB under Cordray "devastated" the financial industry, although the nation's commercial banks and savings institutions reported solid earnings growth for the third quarter.


The CFPB, at present, is a very active regulator of the major banks. CFPB examiners have permanent offices inside dozens of large institutions such as JPMorgan Chase, Citigroup, Wells Fargo, going over things such as sales practices, overdraft fees, and mortgage lending. These examiners look for problems and start building cases for enforcement actions against banks, like in the case of Wells Fargo's fine for its sales practices.

While the examiners will stay put, what Trump's CFPB leadership chooses to do with their findings is another matter. They could choose to take a more relaxed approach to how banks operate, or even sweep aside issues that previously would have garnered attention from a director.


The CFPB currently runs a public, online website where consumers can submit complaints about their bank, credit card company or any other financial services company. Individuals can allow their complaint to be made public, with personal and confidential information withheld, which allows for a running tally of complaints against banks.

Banks dislike the public consumer complaint database, arguing that the complaints are no different than someone leaving a bad Yelp review online, and they are not vetted. The CFPB in the past has argued the public complaint portal is one way to hold banks accountable for wrongdoing. Also since it is public, the data — more than a million public complaints in all — can be used by public watchdog groups, news outlets and other organizations to look for trends or worry spots in the industry. The Associated Press keeps an in-house, constantly updated copy of the CFPB's running complaint database for news reporting purposes.

An industry-friendly CFPB director could significantly curtail or close entirely the public side of the complaint database. The database itself cannot be entirely removed, since it's required by law, just new complaints would likely be no longer public.


A big part of what the CFPB did under Cordray was to write new rules and regulations that impacted numerous aspects of the financial industry. Those rules and regulations are likely to be revisited now under a new director.

For example, the bureau finalized significant regulations on the payday lending industry earlier this year. If allowed to go into effect, payday lenders would be subject to significant restrictions on how they make loans and determine whether their loans can be repaid.

While Mulvaney or any Trump appointee could not rescind those rules entirely, they could delay the enforcement of the rules or even propose significant changes to the rules.

There are also other regulations currently in the works, including rules on how debt collectors can go after consumers, rules related to how banks disclose their mortgage-lending practices, as well as small business lending regulations. All those regulations could be halted while in the works, or rewritten entirely under a Trump director.

"From mortgage rules to small dollar lending, we think there are opportunities for the CFPB to improve Americans' access to financial services," said Jeff Sigmund, a spokesman for the American Bankers Association. "We're hopeful the Bureau will consider the practical implications of regulation and focus on enhancing consumer choice and product availability."


Ken Sweet covers banks and consumer financial issues for The Associated Press. Follow him on Twitter at @kensweet.