A Comment on Eric Grover’s Essay on the CFPB in the Washington Times

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? 

0 thoughts on “A Comment on Eric Grover’s Essay on the CFPB in the Washington Times

  1. s b scheinman says:

    Re Sovern & CFPB
    I am an aggressive activist for fairness,justice,protection of the individual and The Rule of Law. It takes a while to recognize that the half full-half empty glass moral also applies to the issue of who is really on the “side of the angels. Mr Sovern would do the policy and the agency he defends more good by recognizing and admitting striking weaknesses and failures, just as the President is fairly criticized for negotiating with himself.
    Of all the despicable strategies implemented by BIG Banks, the use of abusive, deceitful, illegalities of their “Mortgage Servicers” may represent the worst most destructive to homeowners without the resources to defend against corrupt attorneys and judiciary and with no one one their side.
    What ever happened to the CFPB’s PR claims that all would be “audited and exposed under new regulatory guidelines” A massive audit manual were published but never implimented. It is really worse because the CFBP has totally failed to take on the inciduous legal tactics claiming preemption of such efforts as well as by states attorney by the Federal agency totally co-opted by those Big Banks, the Comptroller of the Currency., which insists it has SOLE authority to regulate those institutions and the fraud perpitrated
    Pre-emption is a huge lie The phoney legal opinion crafted by inhouse Comptroller lawyers is a big lie. BUT every state has been threatened by Federal lawsuits AGAINST permitting them to take actions to protect millions of homeowners. Mortgage servicing is NOT even banking. It is a contractual activity for a fee. Where did the CFPB go? Into the woods and far away, picking the ripe fruit (check-cashing?) and issuing a huge stream of press but never using the pitbull approach needed to defeat lawyers by the hundreds and bank executive decisionmaking which early-on decided to pay the pitiful petty-cash fines while NEVER CHANGING the fraudulent practices which permeate their culture of contempt for the American family and its institutions.
    Mr Cordray, you should be ashamed. Mr Sovern, there is a BIGGER story to tell than the trash Washington Times
    Stanley Scheinman, Westport Ct

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