BY MICHAEL CALHOUN, CONTRIBUTOR – 01/08/17 The Hill
At the height of the financial crisis in 2008, an estimated one out of every 54 homeowners lost their homes. Workers and seniors lost lifetimes’ worth of savings or retirement accounts, small businesses went under, and vulnerable consumers fell victim to toxic and manipulative financial products offered by Wall Street and the big banks.
It was the deepest recession our country had faced since the Great Depression, and it was spurred by splintered, ineffective consumer financial protection practices.
In a meaningful step to protect hardworking Americans and to stop the next crisis before it started, Congress passed a pragmatic law in 2010 that created the Consumer Financial Protection Bureau (CFPB).
The CFPB’s sole purpose was—and continues to be—to make financial markets work better for consumers and responsible financial services providers.
At the helm of the bureau is Director Richard Cordray, who has proven to be a tireless and effective leader. Under his watch, the CFPB has cracked down on the tricks and traps of payday lenders, credit cards companies, debt collectors and bad actors in the industry from taking advantage of unsuspecting Americans.
In its five years as an agency, the CFPB has recovered more than $11 billion for 27 million consumers harmed by illegal practices of financial institutions. The bureau has secured relief in more than 100 cases, directly putting money back in the pockets of American consumers who have been victimized by companies that refuse to follow the law.
In just the last three months, the CFPB has stopped Wells Fargo from opening fraudulent accounts without customers’ knowledge, halted three companies from taking advantage of seniors through reverse mortgages sales, and shut down a scam ripping off lead poisoning victims who were being tricked into signing away their legal settlements.
For the first time in history, American consumers have a vigilant watchdog, yet the CFPB’s opponents—Wall Street banks and financial predators—and their allies in Congress have worked nonstop over the past five years to undercut it.
They are hoping that a current case before the D.C. Circuit Court of Appeals, PHH Mortgage Corp vs. CFPB, will be their path to hinder the agency and provide an opportunity to reinstate the bad practices that line their pockets.
The threat against American consumers is very real. In October, a three judge panel’s 2-1 decision in PHH Corporation vs. CFPB ruled that the president should be able to remove the CFPB director without cause.
However, the full D.C. Circuit Court is now considering whether to review the panel’s decision. As the case between PHH Corporation and the CFPB goes through reconsideration by the full D.C. Circuit Court of Appeals, we are confident that the court will find that the structure of the CFPB is constitutional and that the CFPB director, like other financial regulators, is not removable at the discretion of the president.
The bureau’s detractors, though, see this 2-1 decision as an opportunity to call on the incoming Trump administration to remove Director Cordray from office. This effort is a transparent attempt to manufacture an excuse to defang the CFPB.
Since the full D.C. Court may well reverse the panel’s decision, those attacking the CFPB are now attempting to conjure up other assaults. Under the law that created the CFPB, the president may remove the director only “for inefficiency, neglect of duty, or malfeasance in office.”
That standard is so high that no officer has been removed by the president on this basis since at least the New Deal. Moreover, the handful of times a president has tried to ignore the standard—in 1981, 1983 and 1993—the removal has been blocked by the courts.
Nonetheless, some are now calling for an attempt based on this standard. This is a high standard. Indeed, the CFPB’s detractors have previously argued that the CFPB director was immune from removal under this standard.
Moreover, many in industry have lauded Director Cordray’s performance. Even the court panel decision that is under review praised Director Cordray, calling him “a man of substantial accomplishment and of longstanding and dedicated devotion to public service and the public good.” For CFPB detractors to now claim there is a basis to fire him for cause is the height of hypocrisy and dishonesty.
If predatory lenders succeed in undermining Director Cordray and the CFPB, we will revert back to lax financial regulations. This will signal that it is once again open season on consumers. It could also cause yet another painful economic crisis caused by big banks and predatory lending that we simply cannot afford.
Under Cordray’s direction, the CFPB is fulfilling its mission of protecting consumers—just as Congress intended. We can’t afford to lose Cordray’s leadership or diminish the role that the CFPB plays every day to support hardworking Americans. Not now. Not when we need to rely on it more than ever.
Michael Calhoun is president of the Center for Responsible Lending, a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices.
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