Fact-checking Politifact on the Consumer Bureau

In the latest GOP Presidential debate, Carly Fiorina attacked the Consumer Financial Protection Bureau (CFPB), calling it an agency with “no congressional oversight.” That statement is not just “half true” as it was rated by Politifact, a fact-checking website run by the Tampa Bay Times. It’s untrue.

The CFPB, as Politifact said, does not get its funding through annual congressional appropriations. But the Bureau is a bank regulator, and not a single one of the other bank regulators – the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), or the Office of the Comptroller of the Currency (OCC) – is funded that way either. And for good reason: as far back as 1864, when the OCC was created, this country has sought to bolster the independence of bank regulators by insulating them from the politically-charged congressional appropriations process.

In reaching its judgment that “the bureau has an unusually low amount of congressional oversight,” Politifact appears to have relied on two known critics of the agency, Todd J. Zywicki of George Mason University and Brenden D. Soucy, a Miami lawyer.

By consulting a wider range of authorities, Politifact would have gotten a fuller picture. Arthur Wilmarth of George Washington University Law School, for example, has described the CFPB’s powers, governance and funding arrangements as “hardly unprecedented among federal financial regulators.” Like virtually all regulators, the Consumer Bureau is subject to the many requirements of the Administrative Procedures Act. In addition, as Adam Levitin of Georgetown University Law Center pointed out to a House committee in 2011, the Bureau’s budget, unlike that of the other financial oversight agencies, is capped at a specified percentage of the Federal Reserve’s operating budget, while its decisions are uniquely subject to review and rejection by a council of other regulators.

When all the facts are taken into account, it is clearly neither true nor even half-true to characterize the CFPB as “a vast bureaucracy with no congressional oversight that’s digging through hundreds of millions of your credit records to detect fraud.” Fiorina, in making that statement, is simply repeating a false narrative developed by banks and lenders against the first and only and financial oversight agency with a mandate to put the interests of consumers ahead of the power and profits of the financial industry. By giving Fiorina credit for being even partially correct, Politifact, too, is buying into that narrative.

Lending Discrimination No More Excusable Than Other Forms of Discrimination, Wade Henderson Says

The House of Representatives is preparing to vote on a bill – H.R. 1737, the Reforming CFPB Indirect Auto Financing Guidance Act – that would make it harder for the Consumer Financial Protection Bureau to crack down on auto lending practices that lead to consistently higher interest rates for Black as well as Hispanic and Asian-American car buyers. Wade Henderson, president and CEO of The Leadership Conference on Civil and Human Rights, issued this statement in response:

“Discrimination undermines the civil rights of all Americans, whether in in voting rights, access to quality schools, or racial profiling by law enforcement. Lending discrimination is no different. When lenders redlined Black residents out of homeownership or gouged them on mortgages, we passed laws like the Fair Housing Act. But the vestiges of lending discrimination remain alive and well in the auto industry. We cannot allow auto lenders to charge Black borrowers more than Whites simply because of their skin color. A vote in support of this bill is a vote to ignore lending discrimination.”

 

 

Will Congress Endorse Discrimination in Auto Lending?

If you’re a person of color taking out a car loan, odds are you’ll pay a significantly higher interest rate than you would if you were white. Since 2013, the Consumer Bureau has begun to tackle this long-neglected, well-documented problem, both through enforcement and by issuing a guidance on fair lending law compliance for lenders working with dealerships to finance auto purchases. Congress should be praising the Bureau for its fight against auto-loan discrimination. Instead, a shameful number of members of the House voted last month to curtail the CFPB’s work in this area.

On November 18, the House passed a bill, H.R. 1737, which would invalidate the existing guidance and impose burdensome and unnecessary new procedures on any future CFPB efforts to address the issue. The final vote was 332-96, with 88 Democrats voting in favor.

AFR and our allies will do all we can to keep this bad bill from gaining traction in the Senate or being added as a policy rider to a year-end spending measure. Thus far, over 52,000 Americans have signed petitions urging Congress to reject HR 1737. (You can add your name to AFR’s petition here). And ColorOfChange, Working Families, Center for Popular Democracy and Americans for Financial Reform (AFR) delivered over 50,000 of those petitions to the offices of House Majority Leader Paul Ryan, Minority Leader Nancy Pelosi, and Representative G.K. Butterfield, chair of the Congressional Black Caucus.

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Wall Street Riders Plague Congress’ Year-End Spending Bill

The financial industry has taken a close interest in the congressional struggle to refund the government. Where others find dysfunction, Wall Street sees opportunity.

The big banks and their lobbyists are quietly but aggressively pushing a long wish list of spending bill “riders.” These backdoor measures would roll back the reforms enacted after the 2008 financial crisis and undermine the Consumer Financial Protection Bureau, the first and only financial oversight agency with a mandate to put the interests of consumers ahead of the power and profits of the banks.

This is an industry that has never made much of a secret of its disdain for rules of fair play. Now a disturbing number of legislators have embraced the same contemptuous attitude by lining up behind the use of “must pass” bills to advance Wall Street’s agenda. To counter their effort, financial reformers will need to work hard to expose and oppose the spending riders – and the lawmakers supporting them.

The threat is serious. The rider strategy has worked for Wall Street in the past, notably at the end of 2014, when a massive spending bill turned out to include an amendment repealing a key piece of the Dodd-Frank Act – a provision requiring the riskiest derivatives trades made by bank holding companies to be conducted outside the units that hold deposits and enjoy the benefits of deposit insurance.

This time around, Wall Street has even bigger aspirations. One of the many riders it’s promoting is hundreds of pages long, with subsections that would (among other things) make it easier to issue toxic mortgages like those that helped bring on the financial crisis; force financial regulators to go through a series of new and redundant procedures before issuing rules or taking enforcement actions; and, under the guise of relief for “community banks,” deregulate a wide swath of institutions up to and including the likes of Wells Fargo.

That particular package of proposals was originally a bill authored by Senate banking committee Chairman Richard Shelby, R-Ala. Unable to convince the Senate to consider his legislation through normal channels, Shelby has now publicly stated that the appropriations process (with the implied threat of a government shutdown) offers the “best shot” of getting it enacted.

In another priority attack, the major Wall Street brokerage houses and the big insurance companies hope to derail the Department of Labor’s efforts to safeguard Americans against conflicted retirement investment advice – “advice” that costs us an estimated $17 billion a year. Yet another spending rider would block the Department of Education from cutting off the flow of federal loan money to for-profit career colleges like Corinthian and ITT Tech, which have saddled countless students with crippling debt for worthless degrees. Still other riders would make it harder for nonprofit groups to challenge discriminatory housing and mortgage-lending practices.

A number of these proposals are squarely aimed at the Consumer Bureau. The bureau has earned the ire of Wall Street by delivering more than $11.2 billion in relief to more than 25.5 million Americans defrauded by financial companies. In response, the financial industry is working with its friends in Congress on spending riders that would bring the bureau under the congressional appropriations process and end its guaranteed funding through the Federal Reserve, while, at the same time, placing it under the thumb of a five-member commission chosen by party leaders – a proven recipe for regulatory gridlock – instead of a single director, as Dodd-Frank stipulated.

Other possible dangers are riders that would block or impede the bureau’s specific ability to act against discriminatory auto lending, triple-digit-interest payday-style loans and the financial industry’s use of take-it-or-leave-it agreements to bar consumers from joining forces over a common complaint.

The industry’s agenda is far-reaching. But the riders all share a common purpose: They would make it easier for banks and financial companies to exploit us, whether by cheating consumers, engaging in reckless bets or using taxpayer subsidies to generate windfall profits for a handful of giant institutions and a narrow financial elite.

One more thing these measures have in common: Financial interests are trying to push them into the budget because they would not look good as stand-alone measures that had to be debated in the light of day. In a joint letter to Congress last week, 166 consumer, labor, civil rights, community and faith-based organizations pointed out that a large majority Americans, regardless of political party, want financial regulation to be tougher not weaker; that finding, borne out by repeated polls, was most recently confirmed by a Washington Post/ABC News survey on the presidential contest, in which 67 percent of the respondents (58 percent of Republicans, 68 percent of independents and 72 percent of Democrats) said they would back a candidate calling for stricter financial regulation, while only 24 percent said they would back a candidate opposing stricter regulation.

Congress must reject the use of budget amendments and other undemocratic tactics to advance a special-interest agenda. To make sure it does, the rest of us must convince our lawmakers that we, too, are watching.

— Jim Lardner

Originally published on USNews.com