In the wake of the 2008 economic downturn, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the Consumer Financial Protection Bureau – it was supposed to help defend against another financial collapse. Congress designed the CFPB as "independent," meaning it is largely free of presidential oversight — or any other, for that matter. And as a result, Congress handed the CFPB tremendous power over the financial sector that is largely unchecked and unaccountable to the people or their representatives. Now, this unelected agency is doing grave harm to American consumers and businesses in its pursuit of a narrow, ideological agenda.
The Great Recession revealed that all was not well in the financial industry. But instead of rooting out bad actors on Wall Street, Director Richard Cordray and the CFPB have harassed Main Street businesses that had nothing to do with the economic collapse. Of particular concern is the CFPB's obsession with pushing through the Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule, also referred to as the Small-Dollar Loan Rule.
The Small-Dollar Loan Rule is a solution in search of a problem. The small-dollar lending industry is already highly regulated at both the state and federal level. But if the rule goes into effect studies unanimously agree it will gut the industry with a loss of more than 60,000 good jobs currently held by hard-working Americans. And it will do this while creating "loan deserts" for many Americans who do not have access to traditional banking. Many of these customers will be forced to turn to the unregulated and illegal marketplace for access to small but critical credit – a much riskier pursuit.
For years, the CFPB has been on a mission to take down small dollar lending, despite the urging of leaders on both sides of the political aisle for regulatory restraint. The Obama Administration's Small Business Administration Office of Advocacy, pragmatic lawmakers, attorneys general, as well as state-based leaders, have urged the CFPB to reconsider and propose more sensible regulations that won't eliminate the industry altogether. These and many other leaders understand that the small dollar lending industry provides a vital service to some of our most underserved populations. Nevertheless, the CFPB has charged forward unchecked.
The most disturbing fact is the agency is not independent — it is an unconstrained ideological organization. Whether it's holding closed door meetings with activist groups, engaging progressive advertising firms to promote its agenda, or hiring only left-leaning employees, the CFPB has dropped any pretense of public-mindedness in favor of an ideological agenda.
This degeneration of what was supposed to be a disinterested protector of consumers into political activism has long troubled many lawmakers and reformers. Just last week, House Financial Services Chairman Jeb Hensarling, R-Tex., sent a letter to the Office of Special Counsel requesting a review of Director Cordray's potentially illegal political activity. But it appears that no matter how many lines the CFPB crosses or what official concerns are issued from Capitol Hill, the design of the agency means that neither the agency, nor any future director, can really be reined in.
Government overreach is everywhere in Washington, but the CFPB is one of a kind in this respect. It was designed to be free from political influence, but it seems to have become consumed by politics.
It's time for the CFPB to be reined in. It's time to rethink and restructure the CFPB as a whole. It's time for Congress and the Trump Administration to ensure that future directors can no longer use this agency for their personal political agenda.
Independent should not mean unaccountable, and it certainly doesn't mean ideological. It is time to finally fix what has gone terribly wrong with the CFPB.
Ed D'Alessio is Executive Director of the Financial Service Centers of America (FiSCA).
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