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Evaluating the Effectiveness of the Consumer Financial Protection Bureau

Evaluating the Effectiveness of the Consumer Financial Protection Bureau 

Posted by: Irena Volkov, Apr 9, 2017

The Consumer Financial Protection Bureau (CFPB) is a government agency that strives to protect consumers through empowerment, enforcing company consumer protection laws, and educating financial companies about the responsibilities they have regarding consumer protection. The bureau was created after the financial crisis in 2008 due to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; in other words, the CFPB implements and enforces the consumer protection rights in Dodd-Frank. The director of the bureau is appointed by the president for typically a five-year term. Its primary practices include supervising companies and enforcing laws against deceptive practices, accepting complaints from consumers, promoting financial education, and monitoring financial markets to ensure that there are no new unexpected risks to consumers. According to the Center for American Progress, from its establishment through 2015, the CFPB “has helped return more than $10.1 billion to more than 17 million consumers tricked by deceptive financial practices” (Galles, 2015).

One of the CFPB’s greatest successes was when Ocwen Financial Corporation did not accurately report mortgage payments as well as imposed unauthorized fees on borrowers, and did not provide concerned customers with accurate information, which lead to the foreclosures for almost 185,000 borrowers. The CFPB was the reason Ocwen returned $125 million to the borrowers they foreclosed. However, recently, the CFPB has been accused of not taking further actions to cease fraudulence. For example, there are no documents or evidence of an ongoing investigation into Wells Fargo’s scandal of opening unauthorized customer accounts since 2011. Wells Fargo paid the CFPB $185 million as a penalty, but only a few million dollars were returned to the victims of the scandal. CFPB also did not enforce the bank to admit their wrongdoings to consumers, which did not help criminal prosecutors either. From 2013, Wells Fargo continued the program that drove the unauthorized activity and the CFPB took no action, allowing the former executive of the program, Carrie Tolstedt, to retire with tens of millions of dollars from the scandal right before an official settlement was made.

Critics of the bureau claim that it is not independent from political influences and has transformed into a liberal-advocacy organization, without the welcomed participation of Republicans. Since 2011, Republicans have attempted to restructure the CFPB through multiple legislations, all of which were rejected and labeled as attempts to weaken consumer protection. Additionally, Republican consumers were identified and rejected using screening techniques, and race, religion, and gender discrimination increased under the leadership of Richard Cordray.

The director appointed by President Obama, Mary Jo White could have made the bureau independent of political influences because she was a strong and apolitical lawyer who was universally progressive and respected. However, the current director, Cordray has consistently fed into liberal special-interest groups and even lead the advertising agency for Obama’s presidential campaigns. It is also customary that each director voluntary resigns to allow new presidents to choose the bureau’s next director. A week after Donald Trump’s election, White resigned as the Securities and Exchange Commission chairperson as each chairperson has done in the last 83 years. Cordray has yet to do the same, which strengthens the idea that the CFPB is not politically independent.

So, has the CFPB stayed true to its mission? Is the bureau even necessary, considering four out of every five Americans have not even heard of it? Should Cordray resign so that the new president can appoint a new director? Can the bureau be nonpartisan given its independence from Congress? It is clear that the CFPB needs to be restructured so that it can protect the rights of consumers regardless of their political and personal affiliations.

Original Story: “To save the Consumer Financial Protection Bureau, its director must resign” National Review, Mar 15, 2017

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