- The Consumer Financial Protection Bureau announced a new policy that some fear will weaken its policing of Wall Street.
- The agency, created a decade ago to rein in financial abuse against consumers, has recovered more than $12 billion to date.
- The Trump administration appears to have cut back significantly on enforcement activity.
The agency created in the wake of the 2008 financial crisis to protect consumers from abuse is being gutted from the inside, according to some consumer advocates and legal experts.
A new enforcement policy at the Consumer Financial Protection Bureau is the most recent example of an agency drifting away from its mission to police Wall Street’s bad actors, these advocates say.
The CFPB announced Jan. 24 that it is changing the way it oversees and punishes abusive practices by financial firms. Perhaps most significantly, the watchdog will impose financial penalties, such as fines, in more limited circumstances and will require a cost-benefit analysis before investigating wrongdoing.
The agency claims its new rules will benefit both consumers and the financial services industry, yet some believe its actions amount to a handout that will allow banks, loan issuers and other financial institutions to prey on the public more easily.
“They make it more likely financial services firms will escape enforcement for wrongdoing,” said Patricia McCoy, a law professor at Boston College Law School. “It’s more likely [firms] will get a free pass.”
Congress created the CFPB a decade ago when it passed the Dodd-Frank financial reform law, giving it broad powers to issue and enforce consumer protection rules.
At that time, the country was beginning to emerge from the 2008 financial crisis, which was perpetuated by irresponsible lending practices that reverberated across the U.S. and global economies.
The agency has recovered more than $12 billion for consumers to date.
Enforcement activity at the watchdog has lagged under the Trump administration.
The number of public enforcement cases announced in 2018 was down 80% from the bureau’s peak in 2015, according to a report published in March by the Consumer Federation of America, a consumer advocacy group.
President Donald Trump installed Mick Mulvaney as the agency’s acting director in 2017, replacing Obama-era appointee Richard Cordray, who stepped down before the end of a five-term term.
Trump appointee Kathy Kraninger, who worked under Mulvaney at the White House budget office, has served as director since 2018.
A case before the Supreme Court could ultimately deem the financial watchdog unconstitutional.