New report documents the dismantling of consumer financial protection


April 19, 2019

Imagine that that the community where you live has a police department, a fire station, and emergency medical service. Yet calls to 911 go unanswered. And police officers, firefighters and ambulances never respond to actual emergencies.

Now imagine that the nation’s largest consumer finance regulator and civil enforcement authority, launched in the wake of the 2008 Great Recession to protect the public from unscrupulous financial service providers, practically stopped providing any protection whatsoever.

You don’t have to imagine. It actually is happening.

In 2008, the American banking industry virtually collapsed. $11 trillion in wealth disappeared almost overnight, and 21 million Americans found themselves without work. More than 9 million homes were lost to foreclosure or short sales, and the economic meltdown led to increases in homelessness, hunger, disease, and suicide.

In response, under the Dodd-Frank Act, Congress created and President Obama signed legislation establishing the Consumer Financial Protection Bureau (CFPB). The agency was tasked with helping consumers “make informed and responsible decisions about financial transactions” and protecting consumers “from unfair, deceptive, or abusive acts and practices and from discrimination.”

And, for a while, the CFPB worked as it should. Under then-Director Richard Cordray, an Obama appointee, the agency reached its peak in 2015, and during Cordray’s term in office, it returned an average of $43 million per week in restitution to consumers who had been wronged.

Those days are long gone, according to a groundbreaking report issued last month by the Consumer Federation of America.

The report is as important as it is timely: the Trump Administration right now is attempting to roll back an Obama-era rule that would protect consumers from predatory payday and auto lenders. The Coalition on Human Needs has joined with several of our allies in an effort to generate thousands of comments in opposition to the rollback – you can comment here. We’ll also be hosting a webinar on this topic at 2 p.m. ET Thursday, May 2; register here.

Dormant: The CFPB’s Law Enforcement Program in Decline shows just how large a leap backwards the agency has taken, first under then-Director Mick Mulvaney, and continuing under its new Director, Kathy Kraninger. Both Mulvaney and Kraninger, of course, are Trump appointees.

In the relatively few cases the agency has resolved under Mulvaney and then Kraninger, the $43 million per week that was returned to consumers under Cordray’s leadership has plummeted – first to $6.4 million per week under Mulvaney and then to $925,000 per week under Kraninger. The average amount of monetary relief per case has dropped by a shocking 96 percent. Overall enforcement activity against unscrupulous lenders is down 80 percent from the agency’s peak in 2015.

“Law enforcement activity at the CFPB has dropped precipitously under the Trump Administration’s leadership,” says Christopher Peterson, who authored the report and who serves as Director of Financial Services at the Consumer Federation of America. “It is simply unacceptable for a consumer protection agency to turn its back on consumers that have been harmed by their financial institution’s deceit. Consumers have a right to expect that the federal government will enforce our consumer protection laws.”

There can be little doubt that the protections once provided by the CFPB are desperately needed. The agency’s most recent statistics, required by Congress, show that it received 329,000 complaints from consumers in one year alone. The complaints, in descending order, dealt with inaccurate credit or other consumer reporting; unscrupulous debt collection practices; problems with mortgage loans; and issues with credit cards, deposit accounts and student loans.

But now, when consumers call the CFPB with a problem, it is as if no one is answering the phone. Among the report’s findings:

The number of public enforcement cases announced in 2018 declined by 80 percent from the Bureau’s peak productivity in 2015. In 2015, the CFPB announced 55 public law enforcement actions. In 2018, this number had declined to 11.

The average amount of monetary relief per case awarded to victims of illegal consumer financial practices has declined by approximately 96 percent. Under Director Cordray, the CFPB awarded an average of $59.6 million in consumer restitution per case. Under Director Kraninger, average consumer relief has declined to $2.4 million per case.

Law enforcement addressing illegal credit reporting practices has declined sharply under the Trump Administration’s leadership. The CFPB has announced only two cases enforcing the Fair Credit Reporting Act and settled both without providing a single dollar of restitution to victims of illegal practices.

Law enforcement addressing illegal debt collection practices has declined sharply under the Trump Administration’s leadership. Under Acting Director Mulvaney and Director Kraninger, the CFPB has announced only one case enforcing the Fair Debt Collection Practices Act. The CFPB agreed to settle this case without ordering a single dollar of restitution to victims of illegal debt collection practices.

Law enforcement policing the home mortgage market has declined sharply under the Trump Administration’s leadership. Under Director Cordray, the CFPB announced 61 mortgage lending cases that returned nearly $3 billion in restitution to consumers at a pace of over $10 million per week. Under Acting Director Mulvaney, consumer relief in mortgage lending declined by more than 99 percent to less than $5,000 per week for the entire nation. Under Director Kraninger, the Bureau has not announced a single mortgage-related case, nor any restitution for consumers.

Law enforcement policing the student loan market has declined sharply under the Trump Administration’s leadership. Under Director Cordray, the CFPB announced 15 student lending related cases with an average of $47.5 million in consumer relief per case. Under the Trump Administration’s leadership, the CFPB has not announced or resolved a single student lending enforcement case and has provided no restitution to any consumers.

And under the Trump Administration’s leadership, the CFPB has failed to enforce consumer protection laws prohibiting racial and other forms of discrimination. Under Director Cordray, the CFPB announced 11 cases enforcing the Equal Credit Opportunity Act producing average consumer relief of more than $56 million per case. Under the Trump Administration’s leadership, the CFPB has not announced or resolved a single case alleging unlawful discrimination and has provided no restitution to any consumers.

Some of this seems to be the case of the fox guarding the hen house. For example, the Trump Administration official in charge of preventing racial discrimination has, as the report notes, an unfortunate history of authoring racist blog posts under a pen name.

In a comprehensive, in-depth report, “Make America Pay Again,” to be published in this upcoming Sunday’s New York Times Magazine (and already available on the Times’ website), Times reporter Nicholas Confessore detailed just how complete CFPB’s evisceration has become. He interviewed more than 60 current or former CFPB employees, current and former Mulvaney aides, consumer advocates, and financial-industry executives and lobbyists. He described a fledgling agency that was perhaps Washington, D.C.’s most-feared regulator:

“It announced dozens of cases annually against abusive debt collectors, sloppy credit agencies and predatory lenders, and it was poised to force sweeping changes on the $30 billion payday-loan industry, one of the few corners of the financial world that operates free of federal regulation,” Confessore wrote. “What (Mulvaney) left behind is an agency whose very mission is now a matter of bitter dispute.”

Lisa Donner, Executive Director of Americans for Financial Reform, was among those Confessore interviewed.

“The bureau was constructed really deliberately to protect ordinary people,” she told the newspaper. “He’s taken it apart – dismantled it, piece by piece, brick by brick.”