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Is the CFPB Really Protecting Consumers?


Richard Cordray

In his first appearance before the House Financial Services Committee since September 29, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray on Wednesday sat before the committee to defend his and the Bureau’s recent actions.

Cordray faced intense criticism from the committee's Republicans, particularly Chairman Jeb Hensarling (R-Texas), who said that Congress has made the Director a “dictator” and given him power that is “amazing, frightening, and tragic.”

The Director touted many of the Bureau’s accomplishments in his opening statement, such as last June’s expansion of the Consumer Complaint Database to include consumer narratives, a new series of monthly reports to highlight key trends from consumer complaints submitted to the CFPB which the Bureau began publishing last July, and the Ask CFPB online tool which includes more than 1,000 answers to questions about various financial products.

Republicans—and even some Democrats, such as David Scott (D-Georgia)—on the committee were skeptical that the Bureau's actions are fulfilling its mission to protect consumers. Hensarling, in his opening statement, noted that the “American people are angry” due to a “failed economic recovery,” but they are “even angrier at having their lives increasingly ruled by out-of-touch Washington elites.” Hensarling quoted Thomas Jefferson’s lament that government agencies are sending “swarms of officers to harass our people, and eat out their substance.”

“Today, the poster child of Jefferson’s lament is the CFPB. Its director, our witness, is neither elected nor accountable to the American people,” Hensarling said. “Yet when it comes to consumer financial products, he is vested with the awesome power of the entire United States Congress. This is amazing, frightening and tragic. . . In short, Congress has made Mr. Cordray a dictator. And when it comes to the well-being and liberty of American consumers, he is not a particularly benevolent one.”

Cordray also pointed out that the Bureau has announced approximately $5.8 billion in relief to consumers whom the CFPB determined had fallen victim to predatory financial practices, and that the Bureau has handed out more than $153 million in civil money penalties. Hensarling wasn't so sure about this, either.


Jeb Hensarling

“Apologists for the Bureau, along with Mr. Cordray, frequently cite the tens of millions of dollars of fines they have imposed as proof they are protecting consumers,” Hensarling said. “But the Bureau operates as legislature cop on the beat, prosecutor, judge and jury all rolled into one. Fines imposed in such an abusive structure tell us nothing about justice or consumer welfare. Nothing.”

Whereas much of the questioning in Cordray’s last testimony before the committee in September centered around mortgages and the then-soon-to-be enacted TRID rule, the topic of mortgages was largely absent from this hearing. Cordray did mention during the hearing that the CFPB's "hold harmless" period for those who make a good faith effort to comply with TRID will remain open-ended.

Cordray reiterated his defense of the Bureau's oversight of credit unions, saying that he believes credit unions have benefited from the CFPB's regulations. The National Association of Federal Credit Unions (NAFCU) disagrees, as does three-quarters of Congress. Earlier this week, a bipartisan majority of 329 members of the U.S. House of Representatives sent Cordray a letter asking him to exercise the authority granted to the Bureau by the Dodd-Frank Act to exempt credit unions from certain rulemakings.

The NAFCU reported on Wednesday that since the second quarter of 2010, more than 1,350 federally-insured credit unions have been lost, 96 percent of which had below $100 million in assets.

“The assertion that credit unions are not being negatively affected by the tidal wave of overregulation arising from CFPB and Dodd-Frank could not be more wrong,” NAFCU CEO Dan Berger said. “Director Cordray’s denial that the tide of regulation is not contributing to the continued trend of credit unions being forced to cut back on member services, merge or go out of business flies in the face of facts.”

The subject of questioning from several committee members was the CFPB’s methodology of determining racial discrimination in auto lending—particularly in the case of Ally Financial, which last September settled for $98 million for alleged “disparate impact” discrimination against minority borrowers. Rep. Sean Duffy (R-Wisconsin), who has introduced several bills attempting to reform the CFPB, was especially critical of this, and Cordray was not immune to criticism from Democrats in this area, either. Rep. David Scott (D-Georgia) expressed concerns about the “unintended consequences” of disparate impact in auto lending, such as settlement money going to consumers who the CFPB determined were harmed based on its methodology for determining racial discrimination but in fact were not. Scott said there were other Democrats who shared those same concerns.


About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.

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