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ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

NEWS: November 27

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CFPB's Cordray names a successor, and Trump does too

The director of the Consumer Financial Protection Bureau resigned Friday and named his own successor, leading to an open conflict with President Donald Trump - who announced a different person as acting head of the agency later in the day.

That means there are now effectively two acting directors of the CFPB, when there should only be one.

Typically an acting director position would be filled according to the Federal Vacancies Reform Act of 1998. But Richard Cordray, along with his resignation, elevated Leandra English, who was the agency's chief of staff, into the deputy director position.

Under the Dodd-Frank Act that created the CFPB, English would become acting director. Cordray - an Obama appointee - specifically cited the law when he moved English, a longtime CFPB employee and ally of his, into that position.

Within a few hours, President Donald Trump announced his own acting director of the agency, Mick Mulvaney, who is currently director of the Office of Management and Budget. Mulvaney had widely been expected to be Trump's temporary pick for the bureau until a permanent one could be found.

Mulvaney is a long-time critic of the CFPB, and has wanted the agency's authority significantly curtailed. So the difference between English and Mulvaney running the agency would be significant. Read more at ABC NEWS
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CFSA 
The Wall Street Journal
OPINION / COMMENTARY
What Went Wrong With the CFPB
I was an aide to Barney Frank. I've learned it's a mistake to create an unaccountable agency.

By Dennis Shaul, CEO of the CFSA       Nov. 19, 2017 1:25 p.m. ET

Richard Cordray's resignation as director of the Consumer Financial Protection Bureau provides a great opportunity for President Trump to appoint a new director who can undo an unfortunate legacy of bureaucratic overreach and political bias. More important going forward is what we have learned from our experience with the CFPB to prevent future similar missteps.

The first lesson is that Congress should never again create an "independent" agency with a sole director, particularly one not subject to the congressional appropriations process. Under the law, the CFPB-unlike the Securities and Exchange Commission, the Federal Communications Commission, the Federal Trade Commission and other independent agencies-is funded by the Federal Reserve, a move specifically designed to avoid congressional oversight.

I had the privilege of working as an aide to then-Rep. Barney Frank, chairman of the House Financial Services Committee when the Dodd-Frank Act of 2010, which created the CFPB, was written. I realized that no bill is ever perfect and the CFPB would have its imperfections. The authors wanted the bureau to be a fair arbiter of protecting consumers, instead of what it has become-a politically biased regulatory dictator and a political steppingstone for its sole director, who is now expected to run for governor of Ohio.

An independent federal agency should be nonpartisan. A bipartisan commission on the model of the SEC and FCC would allow for better and more evenhanded decision-making. To show how partisan the CFPB became under Mr. Cordray's leadership, not one of the agency's employees made a contribution to Donald Trump's campaign, while a multitude contributed to Hillary Clinton. The new director will have a partisan staff.

A commission can oversee a professional staff and also provide for better decision-making, preventing some of the missteps and overreach we've seen with the CFPB. For example:

* The bureau took full credit for punishing Wells Fargo for opening false customer accounts. But the Los Angeles Times, not the CFPB, uncovered the malfeasance. More important, the CFPB fined Wells Fargo only $100 million, based on an incomplete investigation that found 2.1 million customers were affected. The actual number turned out to be 3.5 million. Meanwhile, large banks, including Wells Fargo, were fined tens of billions of dollars for toxic mortgages in the financial crisis. A threshold question is whether one person, in this case the director, should have the power to levy such fines.

* Even though the Dodd-Frank Act expressly prohibits the CFPB from regulating automotive finance, the agency jumped into the field, alleging discrimination in auto lending. Because federal law prohibits auto lenders from gathering information on race, the agency had to guess at its claim of discrimination based solely on names and ZIP Codes, which the agency itself admitted as flawed and which one observer described as the equivalent of a student guessing on every answer on his SATs. The agency then went ahead with guidance that raised the costs of an average auto loan by an estimated $600.

* Immediately after it opened its doors, the bureau began to create a true bureaucracy and quickly attracted staff, often by paying higher salaries than those at other regulatory agencies. Many of its examination procedures are duplicative of other financial regulators, and no thought was given to how that could have been avoided.

* The CFPB, like other agencies, collects fines and fees. Astonishingly, Congress does not require them to be transferred to the federal Treasury. Mr. Cordray has boasted of collecting billions of dollars on behalf of consumers, but portions of that money ultimately go to favored consumer groups-a continuing problem of ideological preference.

* A dangerous precedent has been established when the agency writes a rule that could have a direct or indirect personal benefit. If Mr. Cordray was contemplating a political future, including a bid for governor, while running the bureau, that alone created a conflict of interest.

The CFPB's rules would have had destructive effects. The arbitration rule, fortunately overturned by Congress, would have spurred a plethora of class-action lawsuits against financial institutions. It would have prevented consumers being made whole where appropriate, while the winners would have been the plaintiffs bar, a major source of donations to Democratic political campaigns, prospectively including Mr. Cordray's.

In its recent rule-making on short-term, small-dollar lending, the agency used flawed data and ignored the comments of more than a million customers who use the service. It also failed to draw any distinction between legitimate, state-regulated lenders and illegal lenders, primarily online. New York state, for instance, basically prohibits short-term, small-dollar lending, but one can google "New York payday lending" and find literally dozens of offers. The rule will cut off millions from a needed legitimate source of credit, and offers no viable solutions or alternatives.

Two last thoughts to prevent future governmental overreach and politicization of our regulators:

Congress must be disciplined in keeping regulatory agencies within its sights and holding them accountable, so that problems can be cured when they arise rather than becoming a matter of habit. Going forward, the CFPB must be strictly held to its intended purpose.

Congress should consider renaming agencies to reflect their true purpose, which is rule-writing and restrictive regulations (in most cases with good intent). No one is against consumer protection or environmental protection, but calling it the Consumer Finance Regulation Bureau, instead of "Protection Bureau," would provide truth in advertising.

Mr. Shaul is CEO of the Community Financial Services Association of America, the leading trade association for short-term, small-dollar lending.

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A_S Management
Dueling Appointments Lead to Clash at CFPB

President Trump on Friday named his budget director as the acting director of the Consumer Financial Protection Bureau, moving to take control of the agency hours after its departing leader had taken steps to install his own choice for acting chief.

By the end of the night, an agency born of the financial meltdown - and one Republicans have tried to kill from the start - had dueling directors, and there was little sense of who actually would be in charge Monday morning.

The bureaucratic standoff began Friday afternoon when Richard Cordray, the Obama-appointed leader of the bureau, abruptly announced he would leave the job at the close of business, a week earlier than anticipated. He followed up with a letter naming his chief of staff, Leandra English, as the agency's deputy director.

The announcement came with a twist. Under the law, he said, that appointment would make the new deputy director the agency's acting director. The move was seen as an effort to delay Mr. Trump from appointing his own director, whose confirmation could take months.

The White House retaliated, saying that the budget director, Mick Mulvaney, who once characterized the consumer protection bureau as a "sad, sick joke," would be running the agency. He would also keep his current job as head of the Office of Management and Budget.
Read more at NEW YORK TIMES
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