by Jeff Sovern
The drip of bad news for consumer protection continues. Yesterday, the CFPB announced a "Call for Evidence Regarding Consumer Financial Protection Bureau Functions;" Evan Weinberger has more at Law360. Today we learned, as Allison posted, that the Bureau's budgetary request for this quarter is nothing–it will spend down its reserves instead. Allison also reported that the Bureau also dismissed a payday lending case in which the lenders charged interest rates that could reach 950% a year–which raises further concerns about the Bureau's decision to revisit the payday lending rule. Any of these would be cause for worry about the role the Bureau will take in protecting consumers; combined, they suggest that consumer financial protection itself is at risk. And surely more will come.
I want to say more about the Call for Evidence. That sounds anodyne and even laudable: Mulvaney wants to “ensure
the Bureau is fulfilling its proper and appropriate functions to best protect consumers.” And the announcement talks
about giving the “public” an opportunity to submit feedback. Also impossible to criticize. But notice that the
announcement says the Bureau is starting with CIDs. I doubt many members of the public even know what a CID is,
much less have opinions about it. That sounds like the "public" is the financial industry, not consumers. Many of the
other items mentioned similarly don’t sound like things consumers would know about, such as supervision,
rulemaking, and market monitoring. It is far more likely that the industry will weigh in on those matters than
consumers, and not in a way that supports consumer protection. On top of that, I haven’t gotten the sense
that the industry has been shy about expressing its views to the Bureau even under Richard Cordray. It is hard to
believe that the industry would hesitate to let Mr. Mulvaney know what it thinks, especially after the industry had
generously donated money to his campaigns. The announcement also refers to the goal of “facilitat[ing] greater
consumer choice.” That also sounds fine until you remember that when we had more consumer choice, some consumers
chose subprime loans with payments they couldn’t make, and the result was the Great Recession. Consumer choice
is often a postive, but not always. Mr. Mulvaney should reread the title of the Dodd-Frank Act, which describes the
purpose of the law as “to protect consumers from abusive financial services practices,” something that the
announcement doesn’t say a word about. If he wants to ask about anything, how about whether the Bureau is
succeeding in protecting consumers from abusive practices. It did, at least under Cordray.
