The Consumer Financial Protection Bureau (CFPB), under the direction of President Trump’s appointee Mike Mulvaney, is withdrawing from its role of protecting consumers from predatory lending practices. The CFPB was created to correct the abusive practices of banks, payday lenders, student loan servicers, and other financial institutions, but under the Trump administration, the bureau has made a dramatic shift in its policies. The burden now shifts to consumer lawyers and private litigants to step into that void with the resolve and determination to protect the public from predatory lenders and to prevent further harm.
There is an ongoing power struggle for control over the CFPB. In November 2017, the CFPB’s director, Richard Cordray, an Obama appointee, resigned and designated his deputy, Leandra English, as his successor. That same day, President Trump appointed Mike Mulvaney as the bureau’s acting director. Mulvaney was no stranger to the CFPB. Two years earlier, Mulvaney noted during a congressional hearing, “I don’t like the fact that CFPB exists, I will be perfectly honest with you,” and soon thereafter, Mulvaney co-sponsored a bill to eliminate the CFPB. This is the man currently running the agency. However, the District of Columbia Court of Appeals on Wednesday, January 31, 2018, held that the leadership structure remains independent of Trump’s appointment powers, and that same court will hear an appeal by English to halt further action by Mulvaney as the agency’s acting director.
The change in the CFPB’s leadership will determine the course and future of the agency. Presuming Acting Director Mulvaney remains at the helm of the CFPB, the future of the agency looks bleak. In a recent filing with the Federal Reserve for the operating budget of the CFPB, Mulvaney requested that the Fed allocate no new funds to the agency. Mulvaney has indicated that the CFPB is going to dramatically scale back its efforts to protect the public through enforcement actions. Instead, under Mulvaney, the CFPB will focus on a critical examination of its own policies and practices, eliminating regulations and generating new rules.
The name of the agency demonstrates that its purpose is safeguarding consumers from predatory lending practices. Mulvaney, however, recently told CFPB employees that it actually serves the interests of the lenders as well as consumers: “We are government employees. We don’t just work for the government, we work for the people. And that means everyone: those who use credit cards, and those who provide those cards; those who take loans, and those who make them; those who buy cars, and those who sell them.” Perhaps Mulvaney envisions that the word “Lenders” should be added to the agency’s name, Consumer [and Lenders?] Financial Protection Bureau.
Nowhere is the problem more apparent than with government oversight and enforcement actions against abusive payday lenders. “Payday lenders” attempt to circumvent state and federal laws so that they can make short term loans with annual percentage rates that range between 440% to 950% of the loan amount. For example, a typical loan contract on $800 requires the consumer to repay a total of approximately $3,320 over the course of ten months. These abusive lending practices are clearly in violation of state and federal laws. Before Mulvaney assumed the role of acting director, the CFPB was actively seeking to shut down such lending practices through new rules and through lawsuits against such predatory lenders. In recent weeks, however, the CFPB has announced that it is reconsidering its rule to curb payday lending. Further, the CFPB has dismissed one of its prominent lawsuits against four payday lenders.
So, what does this mean for the future of consumer protection? The public now, more than ever, must rely upon lawyers to take up the challenge of righting the wrongs done to consumers. Where, as here, the government no longer protects its citizens, law firms, such as Caddell & Chapman, lead this fight for consumer protection and remain vigilant to protect the public.