As CFPB Escalates Drive Toward Protections, Study Finds CFPB Enforcement Works

This month the CFPB issued its proposed rule prohibiting class action bans in small-print mandatory arbitration clauses; in June it is expected to release its high-cost small dollar lending (payday and auto title loan) proposed rule. Meanwhile, as CFPB's industry opponents hide behind astroturf front groups and Congressional opponents use backdoor attacks, a law professor has released a major report finding that "from its inception [in 2011] through 2015 the agency had a 122-and-0 track record in its publicly announced enforcement actions" and that 93% (over $10.5 billion) of funds recovered for consumers have been for deceptive practices -- "[f]ar from a novel legal theory."

The Consumer Financial Protection Bureau (CFPB) doesn’t even turn five years old until July 21. Its first director, Richard Cordray, was not even confirmed until July 2013. Yet, the CFPB has been busy, very busy. Upon its standup in 2011 as the nation’s first federal financial agency with just one job, protecting consumers, it first completed a series of mandatory rules  as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act to clean up the mortgage marketplace. It has since focused on a variety of educational, enforcement, rulemaking and supervision projects. Most recently, after major dialogue, research and analysis, it has announced major actions on two important, long-awaited rules.

This month the CFPB issued its proposed rule prohibiting class action bans in small-print mandatory arbitration clauses that deny groups of consumers their day in court; in June it is expected to release its high-cost small dollar lending (payday and auto title loan) proposed rule limiting the use of lending models that function primarily as debt traps.

These activities have whipped opponents into a frenzy. Industry lobbyists, while maintaining their usual frenetic lobbying and campaign donation pace, are increasingly also hiding behind a phalanx of dark money astroturf groups (see Politico and Salon and MinnPost) raising misleading attacks on the CFPB. Meanwhile, the bureau’s Capitol Hill opponents are trying to use the appropriations funding process as a backdoor way to weaken the bureau, because they cannot move policy changes through legitimate, “regular-order” committee hearings and up-front votes.

Meanwhile, however, Chris Peterson, writing as a law professor (but who is also a  special advisor to the CFPB director), has released a public draft of a major report finding that “from its inception [in 2011] through 2015 the agency had a 122-and-0 track record in its publicly announced enforcement actions.”

Here are a few more excerpts from 7 “noteworthy” enforcement findings that Peterson uses to argue, essentially, that critics of the CFPB have no clothes. He says that they have “frequently argued that the Bureau is a “runaway agency,” which “continually oversteps its bounds.” However, this claim is in tension with the CFPB’s enforcement track record.”

He explains that the CFPB’s enforcement work is largely based on the sound, widely accepted legal theory that deception in the marketplace is illegal:

“Critics of the CFPB have suggested that the Bureau “dishes out malicious financial policy” and “quibble[s] about ‘hyper-technicalities.’” However, the Bureau’s enforcement focus—as measured by dollars returned to the U.S. public—has overwhelmingly been upon companies that illegally deceived consumers. […] Deception was, by far, the most commonly pleaded claim in CFPB matters. Cases including deceptive practices claims generated over 93% of all relief provided to U.S. consumers: approximately $10.5 billion. Far from a novel legal theory, the federal standard outlawing deceptive practices has been in effect since 1938 and has not substantively changed in any meaningful respect since the Reagan Administration. [citations omitted]”

Peterson also finds that the bureau goes after individuals who violate the law, as well as corporations.

“A key lesson of the financial crisis was that regulatory and enforcement systems broke down, in part, because they allowed individual employee compensation systems “designed in an environment of cheap money, intense competition, and light regulation” that “too often rewarded the quick deal, the short-term gain—without proper consideration of long-term consequences.” This lack of individual accountability for reckless financial practices “encouraged the big bet—where the payoff on the upside could be huge and the downside limited” from the perspective of individual financiers. Taking this lesson to heart, Director Cordray has explained: “I’ve always felt strongly that you can’t only go after companies. Companies run through individuals, and individuals need to know that they’re at risk when they do bad things under the umbrella of a company.”[citations omitted]”

These and other findings of Peterson’s paper “Consumer Financial Protection Bureau Law Enforcement: An Empirical Review,” make it clear that CFPB enforcement actions are making a difference in what had been a Wild West financial marketplace. Among those findings:

  • Over 90% of All Consumer Relief Was Awarded in Cases Where the CFPB Collaborated with Other State or Federal Law Enforcement Partners
  • No Bank Has Contested a Public CFPB Enforcement Action
  • The CFPB Has Demonstrated the Willingness and Ability To Hold Senior Managers at Nonbank Financial Companies Individually Liable for Their Illegal Acts
  • In 2015 Public Enforcement Cases, CFPB Law Enforcement Staff Generated Approximately $9.3 Million per Employee in Refunds, Redress, and Forgiven Debts for American Consumers

Unfortunately, the House of Representatives doesn’t agree with the idea of a CFPB working for consumers and to make the financial marketplace fair. At the behest of powerful industry lobbies, House leaders seek, through both Financial Services Committee action and, increasingly, through so-called policy riders” on Appropriations funding legislation, such as in a bill released today, to eliminate CFPB’s independent funding. The Appropriations Committee notes further: “The legislation also changes the leadership structure of the CFPB from a single Director to a five-member Commission, and requires the CFPB to study the use of pre-dispute arbitration prior to issuing regulations.”

None of these attacks is justifiable:

  • Independent funding for bank regulators is not a new, nor wild idea: it’s been United States policy since 1864.
  • Numerous regulators, from FDA and EPA to the powerful bank regulator known as the OCC, have single directors.
  • The arbitration study already required by Congress is widely considered to be the most comprehensive study of arbitration ever.

The idea of the CFPB needs no defense, only more defenders. Please like and share our new short USPIRG video, “The CFPB Can Help.”


Ed Mierzwinski

Senior Director, Federal Consumer Program, PIRG

Ed oversees U.S. PIRG’s federal consumer program, helping to lead national efforts to improve consumer credit reporting laws, identity theft protections, product safety regulations and more. Ed is co-founder and continuing leader of the coalition, Americans For Financial Reform, which fought for the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including as its centerpiece the Consumer Financial Protection Bureau. He was awarded the Consumer Federation of America's Esther Peterson Consumer Service Award in 2006, Privacy International's Brandeis Award in 2003, and numerous annual "Top Lobbyist" awards from The Hill and other outlets. Ed lives in Virginia, and on weekends he enjoys biking with friends on the many local bicycle trails.