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CFPB Enforcement Paralyzed

posted by Patricia A. McCoy

Normally we say that a law is as strong as its enforcement. On February 7, however, the Consumer Financial Protection Bureau raised questions about the enduring strength of the consumer financial laws in its third Request for Information under Acting Director Mick Mulvaney. This time, the topic is CFPB enforcement. It is not hard to guess where this third "RFI" is headed, insofar as only two new enforcement orders have been entered under Mr. Mulvaney to date. In contrast, from the CFPB's inception through November 2017 (when Mr. Mulvaney took office), the Bureau brought a total of 200 public enforcement actions.

Christopher Peterson at Utah responded to the RFI on behalf of scholars and former regulators, arguing that an efficient marketplace for consumer financial services depends on vigilant enforcement. Without the threat of sanctions, dishonest providers will rationally seek a competitive advantage by deceiving consumers and customers will not be able to do meaningful comparison-shopping. Enforcement ensures that violations by financial services providers do not pay.

Peterson's message is more important than ever, given current efforts to tie CFPB enforcement up in knots. CFPB leadership has floated proposals to make the agency reveal sensitive details about ongoing investigations to targets, curtail the length or scope of CFPB investigations, limit the documents CFPB enforcement can seek, and  restrict cooperation between CFPB enforcement and state attorneys general. In the recent Wells Fargo enforcement order, Mr. Mulvaney even allowed the bank of Pony Express fame to decide how much to pay the consumers it injured. Meanwhile, the agency withdrew a pending enforcement action against payday lenders in federal court at the behest of Mr. Mulvaney, who had previously received contributions from the payday lending industry when he was a Congressman.

Consumers have much to lose from the sleeping potion Mr. Mulvaney has administered to CFPB enforcement. Surely everyone can agree--Democrat or Republican, consumer or industry--that dishonest business practices must not be tolerated. Recognizing that, the last CFPB Director, Richard Cordray, put a priority on vigorous enforcement for deceptive or misleading practices. On his watch, the CFPB's deception cases resulted in almost $10.5 billion dollars in relief to consumers. That's a track record to emulate.

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