The CFPB has protected American consumers since the financial crisis, but its future will be put to the test in the Supreme Court


The consumer office aims to protect Americans from shady practices sometimes used by credit card companies, payday lenders, student loan servicers, debt collectors, and other financial institutions. It was created by Congress, as part of the Dodd-Frank Act, in the wake of the 2008 financial crisis, during which many Americans were faced with risky mortgages as home prices plummeted.

At the time, the Obama administration hoped to help prevent another economic collapse in the future. He turned to Elizabeth Warren, then a Harvard law professor, to spearhead the initiative.

While many Americans may not be aware of what the agency is up to, it has become the cop of the moment, working behind the scenes to monitor the practices of lenders, debt collectors and credit rating agencies. Shortly after its creation, the CFPB created new standards for the mortgage market. It also collects consumer complaints and helps them get responses from businesses.

“The financial system is complicated. After the financial crisis, it was obvious that there had to be a consumer-focused agency that could oversee financial institutions in general,” said Vaishali Rao, partner at Hinshaw Law who focuses on regulation. consumer financial services. and compliance.

There are several possible outcomes, depending on how the Supreme Court rules. You may decide that the president can fire the director for no reason. You could go a step further and suggest that the office be run by a commission, rather than a single director. The ruling may completely invalidate the office’s work, but it could also leave the status quo in place.

Former CFPB director Richard Cordray told CNN last week that he believes the court is likely to find the office structure unconstitutional, meaning it would allow the president to fire the director without reason.

But even if that’s the case, Cordray believes the agency is here to stay.

“I think the ruling is highly unlikely to break or challenge the bureau’s work,” he said.

The CFPB’s first public enforcement action was in 2012, when it ordered Capital One Bank to repay approximately $ 140 million for clients for pressuring them to pay for “add-on products” like payment protection and credit monitoring when they activated their credit cards.
The CFPB exposed widespread fraud at Wells Fargo in 2016. Bank employees had opened millions of fake bank and credit card accounts on behalf of clients. The bank was ordered to return the money to the victims who were charged fees on those ghost accounts. The office worked with the Los Angeles city attorney, who had already sued the bank, using their national jurisdiction to advance the investigation.
Then in 2018, the CFPB hit Wells Fargo again with a fine of a billion dollars, collected in conjunction with the Office of the Comptroller of the Currency for forcing clients to purchase auto insurance and charging unfair fees to mortgage borrowers.

The practices of the office have come under attack, especially by some Republicans who argue that it has too much power and that it overlaps with other federal agencies such as the Federal Trade Commission and the Office of the Comptroller of the Currency. Under Trump, he has moved to reverse some regulations on payday lenders and a ban on forced arbitration clauses.

Currently, the office director has a five-year term. Cordray, who was appointed by President Barack Obama, fought endless calls for his dismissal after President Donald Trump took office in 2017. He remained in command until November of that year. go down several months before his term ended. Meanwhile, Trump named Mick mulvaney, who as a member of Congress lobbied to abolish the agency. The current director, Kathy kraninger, was confirmed in 2018.

If the court rules that the president has the power to remove the CFPB director for no reason, it may not have any impact in the short term, but it could make the office more political, said the associate director of the National Center for Consumer Law, Lauren Saunders.

“We don’t expect Trump to fire Kraninger. He named her,” she said, but added that “our consumer protection work should not be based on who listens to the president.”


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