Lord, give me patience. Just not right yet. You’ve got to love the self-righteous indignation and handwringing from folks who have their hand stuck in the federal cookie jar right now. I don’t know if it’s all right or all wrong. But then neither do you and you’re all pretty free about sharing your opinions – so, here’s mine on what’s happening with the CFPB today – might change by tomorrow. Give change a chance.
The Consumer Finance Protection Bureau (CFPB) opened its doors in 2011. The agency had been proposed in 2007 by then law professor and erstwhile Native American Elizabeth Warren, who envisioned herself as the agency’s director leading a righteous crusade against ‘big business’. The CFPB’s creation was ultimately authorized in 2011 by the Dodd-Frank Wall Street Reform and Consumer Protection Act, absent Elizabeth Warren. The Dodd-Frank Act itself was a legislative response to the 2008-2009 financial crisis and subsequent recession. Parts of Dodd-Frank were subsequently repealed in 2018, but the CFPB remained.
The CFPB was chartered as a U.S. government agency dedicated to making sure consumers are treated fairly by banks, lenders and other financial institutions. Their goal has been to curtail abusive lending and debt collection practices, reform mortgage lending, respond to and investigate some 25,000 consumer complaints a week, pursue other alleged misdeeds directed against bank customers like excessive and usurious overdraft and credit card fees, predatory lending practices, and more. The agency claims to have extracted nearly $19 billion from financial institutions for 29 billion consumers in refunds and cancelled debts. These are, in fact, worthy goals and the bureau has had some positive impact on the financial market.
But almost from its inception, the CFPB has also been controversial. It was established as an independent bureau within the Federal Reserve. Funded by the Fed rather than Congress, it creates and enforces its own rules, receives funding partly from fines collected for violation of those rules, and its Director could not be dismissed by anyone, including the President. It was a recipe for overreach by its very definition, and it lived up to those expectations during its lifespan. Which now may be drawing to a close.
The CFPB has won and lost numerous court challenges since its founding including a 2020 Supreme Court ruling allowing the President to remove the Director without cause, and a 2024 ruling affirming the constitutionality of the agency. Recently, increased politicization of government agencies has put the CFPB under more scrutiny. Some former supporters now question its adherence to mission and perceived overreach under recently deposed Director Rohit Chopra.
Mr. Chopra, who posits himself as a ‘friend to small business’, has actually brought most enforcement actions against small business, including revisions to the Community Reinvestment Act (CRA), which a federal court blocked, as well as regulatory assaults to impose de facto diversity quotas on mortgage lenders under the guise of preventing red-lining. Those of you who have followed my column may remember discussions about the 2008 mortgage meltdown. That crisis was at least partially precipitated by the CRA requiring lenders to fund mortgages to minorities regardless of a borrower’s ability to repay (ATR). Sheer lunacy that Chopra proposed to revive under obeisance to DEI. That CRA action led to a disproportionate number of minority borrowers losing their homes then, something we do not need repeated today. And let’s be honest, if we applied the ATR consumer laws to the Federal Government, the Government would be the recipient of the largest fine to date.
Following the November election of Donald Trump, the Senate issued a warning that federal agencies should refrain from ‘midnight rulemaking’ until the new administration had an opportunity to review. Mr. Chopra, unable to control his impulses, insisted on taking just a few parting shots to extend CFPB oversight of digital payment apps, crypto wallets, and other fintech debanking efforts. In December the Wall Street Journal warned that ‘if Mr. Chopra is allowed to stay in power, he’ll end up being a source of opposition to Mr. Trump’s deregulatory agenda. His populist soundings on finance mask a progressive who dislikes markets and business.’ Now, he’s gone.
As of this writing, the CFPB is under the direction of former FDIC member Jonathan McKernan and Elon Musk’s DOGE is in the house. Some 1,700 probationary employees have been terminated, the agency offices have been shuttered, and a ‘404 error’ greets visitors to the agency’s webpage. Critics of a CFPB shutdown cite the important work the CFPB has done to protect consumers. But critics of the CFPB itself point out that this duplicitous enforcement agency was never required to enforce actual laws and rules as there are numerous state and federal agencies with the charter to provide that same level of protection. You may anticipate the customary handwringing and alligator tears from those who trot out the hackneyed chestnuts of ‘existential threat’ and ‘constitutional crisis’. Sen. Elizabeth Warren likens it to ‘a bank robber trying to fire the cops and turn off the alarms before strolling into the lobby’. A more apt description might be that the bank has already been robbed, Elon Musk has viewed the videotape and identified the robber, but now Warren wants to arrest Musk.
By the time you read this we will have a much clearer idea of the fate of this and other agencies. Both sides of the aisle seem to agree that as a nation we’re drowning in debt with no other outcome than default absent significant, and in some cases, draconian changes. Let’s give change a chance.