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. He is CEO of the Community Financial Services Association of America.

"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."

"the Dodd-Frank Act of 2010 . . . 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."

"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."

"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."

"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"

"The agency then went ahead with guidance that raised the costs of an average auto loan by an estimated $600."

"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."

"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."