by Jeff Sovern
A fellow named Eric Grover had a piece atacking the Consumer Financial Protection Bureau in the Washington Times this week titled "CFPB’s unchecked power." A line at the end of the essay explains "Eric Grover is a principal at Intrepid Ventures." I had never heard of Intrepid Ventures, but their web site states "Clients have included a broad range of payments, financial services . . . firms[, including] Fortune 10 global financial institutions." The web site reports that Grover's "prior experience includes Visa International, GE Consumer Finance, Bank of America, NationsBank and Transamerica. Mr. Grover currently serves on the board of Nordstrom's credit card subsidiary." So Grover is part of the financial services industry, though readers unfamilar with Intrepid, as I was, may not have realized that. It would have been appropriate to make clearer his interest in this matter.
What did Grover say about the CFPB? Here are some quotes, in italics, with my responses:
The abuse standard is new and gives bureau mandarins a blank check.
It is indeed new, but it doesn't give the Bureau a blank check. The statute specifically identifies the circumstances in which conduct can be found abusive.
The bureau took its first scalp with Capital One’s $210 million settlement for deceptively marketing payment protection and credit monitoring. The $25 million in penalties it collected will be used to reward administration allies.
Does anyone believe that Cap One would have settled the case for $210 million if it hadn't had a significant possibilty of being found liable for at least that sum? Put another way, how plausible is it that Capital One did nothing wrong yet still agreed to pay that kind of money? And what is the basis for the statement that the penalty funds willl be used to "reward administrative allies?"
Easy-to-vilify payday lenders may be next.
Could it be that they are easy to villify because they are doing something troublesome?
Bureau architect Elizabeth Warren, director Richard Cordray and Mr. Obama think hapless consumers are victims of predatory financial institutions and, even if all products’ material facts are disclosed fully, Joe Six-Pack cannot be trusted to make the “right” choices.
Unfortunately, the evidence shows that many consumers make bad borrowing choices, especially when they are helped along by predatory lenders, and that that's why we had a financial crisis. What evidence is there to the contrary?
As Mr. Cordray declared, “We cannot afford to tolerate practices, intentional or not, that unlawfully price out or cut off segments of the population from the credit markets.” This is exactly the kind of thinking that brought down the housing market. The willful weakening and politicizing of credit wreaked havoc in the financial sector. If the government learned its lesson from that catastrophe, credit would be more expensive and less available to risky borrowers.
This sounds like another claim that the Community Reinvestment Act caused the Great Recession. Such attacks have been shown time and again to be utterly specious.
Credit card issuers rely on race-blind scores to approve accounts. Paraphrasing King, credit scores judge men by their character, not their skin color. But many liberals don’t believe in colorblind credit. In a thinly veiled call for intervention, The Washington Post reported “a persistent gap between the credit scores of white and black Americans.” Logically, the next step is a call for credit-scoring apartheid, which would be disastrous for financial markets.
How can we know how credit scores judge people? Fair Isaac has provided only a bare bones description of what goes into credit scores. The phrase "credit-scoring apartheid" sounds pretty bad, but what does it mean?
I could go on, but you get the idea. Another banking person wants banks to be able to do what they want. So what if we have another Great Recession?