In its original conception, the Consumer Financial Protection Bureau (CFPB) exists to impose oversight on our market such that you, the consumer, don't get grifted by investors and lenders. Like so many other government institutions, however, the Trump Administration has turned that concept on its head. On Thursday, ahead of a scheduled meeting with the CFBP director, a collection of economic justice groups announced in an open letter that they would not take a seat at the table.
The Obama Administration established the CFBP in 2010, with the passage of the Dodd Frank Wall Street Reform and Consumer Protection Act. The idea was to guard against another mass meltdown and 2008-style crash, by regulating the non-bank financial institutions—private student loan companies, private mortgage lenders, credit reporting agencies, and so forth—that had been playing fast and loose with other people's money. Unsupervised, they undertook exploitative and deceptive lending practices, tacking on hidden fees and fines, often unbeknownst to customers. The CFPB aimed to make sure people knew what they were buying into, while at the same time keeping shady financial practices in check.
In the Donald Trump presidency, what should be an independent watch-dog agency has been co-opted to serve the "interests of the financial services industry, abandoning its founding mission 'to protect consumers from unfair, deceptive or abusive practices and take action against companies that break the law,'" according to a letter co-signed by Dora Galacatos, Executive Director of the Fordham Law School Feerick Center for Social Justice, and co-director Sarah Ludwig, and legal director Susan Shin of the New Economy Project.
"Before the Trump administration took over the CFPB, we had a long working relationship with the agency and engaged in constructive debate on rule-making proposals and more," the letter reads. "Given the CFPB's shift under the Trump administration to an unabashedly pro-industry stance, we have no reason to believe that meeting with you today would yield constructive outcomes for the people and communities the CFPB was created to protect."
In February 2018, for example, Trump's acting CFPB chief, Mick Mulvaney, gutted the Office of Fair Lending and Equal Opportunity, which existed to ensure that, for example, people weren't offered higher or lower interest rates based on the color of their skin. Mulvaney—who also sought to consolidate a weakened CFPB under the president's authority—dissolved the body's advisory board, comprised of experts who offered insight into intricate economic, financial, and policy decisions. And earlier this month, the CFPB defanged payday loan restrictions that would have protected low-income borrowers from predatory lenders imposing staggering interest rates.
That last move came courtesy of the bureau's new director, Kathy Kraninger, formerly of the Office of Management and Budget and nominated by Trump to her current position in July. At the time, Massachusetts Senator and 2020 presidential candidate Elizabeth Warren blasted the appointment in a report probing Kraninger's CV. At the OMB, Warren argued, Kraninger's "inability to ensure an adequate, timely response" to Hurricane Maria in Puerto Rico "turned a national disaster into a man-made disaster." Further, Kraninger helped craft a budget that would have, according to Warren, inflated the country's affordable housing crisis. She also helped architect the "zero tolerance" immigration policy that provided for family separation at the U.S. border with Mexico.
While the New Economy Project has traditionally met with the CFPB director during their New York visits, the organization—along with the National Center for Law and Economic Justice and New Jersey Citizen Action,which sent the CFPB similar letters—are taking a hard pass this time.
Read the New Economy Project's full letter below.
Dear Director Kraninger:
We write to explain why we are declining your invitation to meet today in New York City. Under normal circumstances, we would certainly meet with the head of an important agency, even if we disagreed with policies the agency was pursuing. But the current situation is anything but normal.
When Mick Mulvaney took over as the Consumer Financial Protection Bureau (CFPB)'s Acting Director, the Bureau—by the Trump administration's design—ceased being an independent agency. Since then, the CFPB has served the interests of the financial services industry, abandoning its founding mission "to protect consumers from unfair, deceptive or abusive practices and take action against companies that break the law."
The CFPB now actively enables the economic exploitation of low-income people, people of color, older adults, immigrants, women, and veterans. To cite just a few recent examples:
• At the behest of the payday loan industry, the CFPB has moved to rescind important
borrower protections, including the requirement that payday lenders verify that borrowers have the ability to repay loans—a basic tenet of sound underwriting. The ability-to-pay requirement, developed after five years of painstaking research and stakeholder dialogue, would help prevent unscrupulous lenders from trapping people in endless cycles of debt. The CFPB's statement concerning its proposed rescission—that there was insufficient evidence for promulgating the rule—is simply preposterous. Similarly, through the rulemaking process the CFPB received more than ample evidence demonstrating the benefits of strong state protections, like we have in New York, that ban this especially harmful financial product.
• The CFPB's recent proposal to create a "regulatory sandbox" would offer a safe haven to unscrupulous lenders that target low-income people and people of color for predatory products, without oversight or repercussion. This flies in the face of the Bureau's charge to protect consumers from unfair, deceptive, abusive, and discriminatory acts and practices.
• The dismantling of the CFPB's Office of Fair Lending last year was another step toward gutting the agency. Congress created the CFPB in direct response to the subprime lending and foreclosure crises, and mandated creation of the Office of Fair Lending to address rampant fair lending violations that people and communities of color, in particular, experienced—and continue to experience—across the U.S. The agency's abandonment of fair lending enforcement and supervision provides a clear pass to financial services companies, signaling that lending discrimination will go unchecked by the agency.
The damage you and your immediate predecessor are doing to the Bureau brings real harm to real people.
Before the Trump administration took over the CFPB, we had a long working relationship with the agency and engaged in constructive debate on rulemaking proposals and more. Never in question was the leadership's commitment to fulfilling the CFPB's mandate to protect the interests of people most harmed by unfair, deceptive, abusive, and discriminatory financial practices—low-income people, people of color, older adults, immigrants, women, and veterans. Given the CFPB's shift under the Trump administration to an unabashedly pro-industry stance, we have no reason to believe that meeting with you today would yield constructive outcomes for the people and communities the CFPB was created to protect.
Quite apart from our objections to the anti-consumer direction of the CFPB, we cannot in good conscience meet with you, given your reported role in the Trump administration's "Zero Tolerance Policy"—an unspeakably horrific program that has created a humanitarian crisis. Your role in the Trump administration's family separation program constitutes a gross human rights violation and implicates you in one of the most ignominious acts in U.S. history.
We cannot pretend to undertake business as usual. We will continue to do all we can to advance financial justice and fight for our democratic institutions.
Dora Galacatos, Executive Director, Fordham Law School Feerick Center for Social Justice (signing in her individual capacity)
Sarah Ludwig, Co-Director, and Susan Shin, Legal Director, New Economy Project