Doubts Arise Under Mulvaney’s Leadership of the Consumer Financial Protection Bureau
Inside Subprime: Sept 18, 2018
By Ben Moore
The Consumer Financial Protection Bureau was created to protect consumers from predatory payday loan providers, as well as credit card companies, student loans, and debt collectors. Those industries naturally have targeted the CFPB with lobbyists to Congress, with an ultimate goal of stripping the bureau of its independent regulation abilities. But the election of Donald Trump has seen quick implementations of anti-regulatory policies that been a wish come true for those industries.
In November of 2017, the bureau’s permanent director, Richard Cordray, resigned to run for governor of Ohio. His replacement was Trump appointed Mick Mulvaney, a former Republican House member and also the head of the Office of Management and Budget. Mulvaney’s presence in the bureau resulted in immediate political control, with Mulvaney monitoring career employees in each division of the bureau, as well as zero budget requests for operations. Mulvaney fired his entire advisory board in June of this year after several staffers became critical of his leadership. He even changed the name of the bureau to the Bureau of Consumer Financial Protection. Mulvaney has also been transparent about his allegiance to lobbyists. He was quoted saying that he had “a hierarchy in [his] office in Congress”, claiming he never spoke with lobbyists who didn’t pay, but that if “you’re a lobbyist who gave [him] money, [he] might talk to you.”
One of the major bureau changes has been Mulvaney’s approach to student loans. American students currently owe more than $1.5 trillion in student loan debt. Eight million of those students have student loans in default, and three million are more than two payments behind. With such high debt, student loan borrowers are more susceptible to scams, and the CFPB has historically worked to protect student loan borrowers. The bureau has returned around $750 million to borrowers wrongfully charged. The CFPB’s good will to student loan borrowers hasn’t set well with lenders, and once Mulvaney took charge, he folded the bureau’s student-loan division into the consumer-education office, which many took as a sign that the bureau would discontinue monitoring student loan scammers.
The CFPB has also decreased their protection of military members and veterans under Mulvaney’s leadership. The Military Lending Act, passed in 2006, was created with capped interest rates for loans, and the CFPB regularly sanctioned lenders who violated the act, until recently. But no other lender type has benefitted more than payday lenders. He transferred the Office of Fair Lending and Equal Opportunity directly to his office, and dropped a lawsuit against a variety of creditors in the country including Golden Valley Lending and Silver Cloud Financial, two organizations that violated the Truth in Lending Act by not disclosing the true cost of the short-term loans to their customers – with interest rates ranging from 450 to 900 percent. The organizations claimed they were protected by “tribal sovereign immunity” because the companies were incorporated on Indian reservations, keeping authorities from intervening since they had no jurisdiction.
There is still hope that the bureau will continue to protect the consumers it was designed to protect. Christopher Peterson, a former CFPB official who was a special advisor to Cordray, believes that “the essential strengths and features of the bureau are still intact” and that “the bureau can continue to serve the function that Congress asked it to serve.” However, with Mulvaney loosening the reins on predatory lenders, time will tell to see if this remains true.
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