The gloves are off. Supporters of the Consumer Financial Protection Bureau, the brainchild of Senator Elizabeth Warren (D-Mass.), which is tasked with protecting consumers against financial fraud, unleashed a legal tsunami this week in efforts to save CEO Richard Cordray and stay independent under the Trump administration.
Continue Reading Below
“The independence of the agency is crucial,” said Constitutional Accountability Center President Elizabeth Wydra during a conference call on Thursday. The center filed a motion on behalf of Senator Sherrod Brown (D-Ohio) and Representative Maxine Waters (D-Calif.) to intervene in a case in which a federal appeals court previously issued a ruling that would put the CFPB under the direction of the president. U.S. PIRG, Americans for Financial Reform and a host of other consumer advocates filed their own motion to intervene in the case, as well. If allowed to stand, the ruling would give the Trump administration the power to fire the agency’s first and only director Cordray.
Attorneys general from 17 states also joined the fight earlier this week.
“Rich Cordray is the LeBron James of regulators, it makes no sense to fire him,” said Ed Mierzwinski, consumer program director of the U.S. PIRG, during an interview with FOX Business. Mierzwinski notes that the bureau has returned nearly $12 billion to consumers over the past five years and has grown to a staff of 1,500 to help snuff out bad financial behavior aimed at consumers.
However, critics say Cordray has too much power. “They just don’t want the agency to be governed by an individual making all the decisions,” said attorney Alan Kaplinsky of Ballard Spahr. As the firm’s lead partner of the Consumer Financial Services Group, he has represented clients against the CFPB. Replacing a single director with a three- to five-member panel would be a far better governance structure, he noted.
The CFPB is an independent bureau established through the Dodd-Frank Act following the financial crisis, the worst economic downturn since the Great Depression. Warren, who at the time was a professor at Harvard, spearheaded the idea. Messing with the bureau could create more bad blood between Warren and Trump, who largely spared her during the campaign. Warren continues to be a frequent critic of President Trump on Twitter (NYSE:TWTR).
While the future of the CFPB remains cloudy, Trump’s pick for Treasury secretary, Steve Mnuchin, hinted it may, at the very least, need an overhaul.
“That's a complicated issue,” he said after being asked to give his take on the bureau during his confirmation hearing last week. “The biggest issue I have with the CFPB, I don't believe they should be funded out of profits from the Federal Reserve. I think they should be funded out of an appropriations process.”
Mierzwinski scoffed at Mnuchin’s idea; “That is code for I want to kill the CFPB,” he said. For Warren, a funding shift would give the big banks more power. “The CFPB gets an independent source of funding – like every other federal banking agency in U.S. history – so that it can hold banks like Wells Fargo accountable without fearing budget cuts from big bank allies in Congress. If Mr. Mnuchin and others push to change the consumer agency's funding source, they will be declaring loud and clear that they care more about pleasing big banks than protecting working families and the safety of our financial system,” she said in a statement to FOX Business.
As the CFPB hangs in the balance, the new administration has made it clear that some aspects of Dodd-Frank need to go. On Thursday Vice President Mike Pence promised to pass regulatory reform, which means “dismantling Dodd-Frank,” he told a crowd at the GOP retreat in Philadelphia.
Last year, the CFPB levied a record $185 million fine against Wells Fargo (NYSE:WFC) for creating upwards of two million phony customer accounts to allegedly meet sales goals. Prior to the fine, in 2013, the Los Angeles Times reported the practices.
The CFPB declined FOX Business’ request for comment. White House Press Secretary Sean Spicer told reporters earlier this week, “no decision has been made at this time on that [CFPB leadership].”