During the fallout from the financial crisis, I worked with Congress to design the Consumer Financial Protection Bureau to stand up for consumers and hold accountable the giant corporations that had crashed the economy. Congress gave the agency a lot of tools to level the playing field — it can write rules to implement laws and sue financial institutions that break them. CFPB examiners inspect financial institutions to make sure their practices are fair and don’t cheat customers. And CFPB handles complaints that come directly from consumers.
Every one of these actions is powered by consumer data. For example, CFPB bank examiners and enforcement lawyers can’t detect a mortgage scam or catch a dishonest student lender without information about consumer accounts. Likewise, if a consumer submits a complaint about an improper fee that shows up on their bank statement, the CFPB can’t help unless it knows the consumer’s name and account number.
That’s why I was concerned when I saw that Office of Management and Budget Director Mick Mulvaney halted the collection of this anonymous data on Dec. 4. On Jan. 5, I sent him an oversight letter to ask for more information. His Jan. 18 response conceded that the initial stated rationale for the data freeze was bogus and that his unjustified freeze undermined CFPB’s critical work to protect consumers.
Consider how the data freeze affects bank examinations. Through examinations last year, CPFB caught two different mortgage servicers that hid the process for applying for foreclosure relief from borrowers. It also caught three big credit reporting agencies that misled customers about their credit scores, a lender who got customers through misleading advertisements and then stole from them, and dozens of other companies that were cheating their customers. Once it discovered these frauds, the CFPB set to work making sure the financial institutions stopped these practices and helping consumers to recover without ever going to court.
CFPB usually starts working with a financial institution months before an on-site examination to get information about its operations and compliance practices. This helps the agency look into a bank’s specific vulnerabilities and risks and saves time and money for everyone. CFPB knows what testing it needs to do, what processes it needs to follow and which employees it needs to interview, minimizing the disruption at the institution and reducing costs for the CFPB.
Mulvaney’s announcement turned this sensible, orderly process on its head. In the chaotic aftermath, examiners were told to stop asking supervised entities for any information at all, effectively halting all examinations in progress without a clear timeline of when they’d restart or a plan to inform the regulated entities. Even worse, examiners were told that in the long term, they’d only be allowed to review consumer data on-site. Without information to prepare and scope the onsite examination, examiners will be flying blind, guessing at risks and scrambling to catch up. Follow-up will be impractical. As a result, examinations will be less efficient and less effective, CFPB examiners will have to stay longer on site to get less done and American families will be put at risk of financial scammers.
To make matters worse, Mulvaney misled the public about the reason for his order. He justified the shutdown with the claim that the agency’s inspector general documented serious cybersecurity vulnerabilities in two recent reports. I take data security very seriously, so I reviewed the reports, their recommendations, and CFPB's response. The first — part of an annual governmentwide cybersecurity audit — showed CFPB outperforming most other financial regulators and making strong year-over-year progress. The other reviewed agency practices from 2013-2014 and proposed some recommendations, most of which have already been implemented. The IG did not recommend shutting down data collection or halting enforcement in either instance. When I pressed Mulvaney on this in my letter, he didn’t even try to defend his reliance on these reports.
The CFPB is a cop on the beat, making sure that consumer markets are safe and everyone is playing by the same rules. Mulvaney is working overtime to hamstring those cops as he puts the interests of Wall Street banks and various scam artists ahead of the interests of American families who are trying to buy a home or save for college. Instead of standing up for these families, Mulvaney is trying hard to make the consumer agency work for the people who want to cheat consumers.
It’s time for President Trump to nominate a new CFPB director who has a proven track record of standing up on behalf consumers. The agency should be led by somebody who understands the challenges that Americans face every day, who levels with them about his actions and who works tirelessly to try to level the playing field. American families can’t afford to wait any longer.