by Jeff Sovern
The CFPB protects consumers in a number of ways. Perhaps the three most important things it does are enforce the law, supervise some financial institutions, and create rules. A less important mechanism, but still important, is maintaining its complaint database. All of these seem to be coming under attack under Interim director Mulvaney.
Enforcement. As I pointed out earlier this week, Mr. Mulvaney has promised vigorous and consistent enforcement of consumer law, but the CFPB has not announced a single enforcement action in the more than three months he has been on the job–which contrasts strikingly with the numbers of actions his predecessor brought. Instead, Mr. Mulvaney said on Wednesday that the CFPB should let states take the lead on consumer protection. That sounds fine, except it's not what Congress intended when it created the CFPB and gave it enforcement powers. Another problem is that some attorneys general are more protective of consumers than others, for reasons of ideology and resources, and so in some states only the CFPB protects consumers in financial matters (or at least it did before the Mulvaney era). Still another problem is that AGs are not equipped to conduct national actions, unlike the CFPB. While AGs offices do occasionally band together to pursue common goals–sometimes quite effectively–such collectives require coordination among multiple offices, which can be less efficient than having a single office enforce the law. Mr. Mulvaney has also said he wants to use education rather than enforcement. But serious doubt exists about the efficacy of consumer education. Like disclosure, it may create the illusion of consumer protection without the reality.
Supervision. Yesterday, Mr. Mulvaney reportedly said that the CFPB should take a back seat to the prudential regulators in supervision. Those would be the same regulators, like the OCC and Fed who were captured by lenders and allowed the disastrous subprime lending that led to the Great Recession. Congress created the CFPB and gave it supervisory power precisely because of the failure of the regulators Mr. Mulvaney wants the CFPB to let drive the supervisory process.
Rules. Rules take a long time to create and so it isn't surprising that the CFPB hasn't announced any new rules under Mr. Mulvaney. But he has said the Bureau may revisit the payday lending rule.
The Complaint Database. Though less heralded, the complaint database has also been an effective consumer protection mechanism as well as a useful research tool. But the Bureau has just issued a request for information on the complaint database. Nothing wrong with that. But I fear that the Bureau will use the resulting filings to reduce the information made public, especially as the RFI asks that commenters address that issue (as well as whether more information should be made available). Given that industry advocates already have compared the Bureau complaint database unfavorably to Yelp, I think we know much of what the industry will say.