We now have a CFPB succession crisis with a Director and a Pretender. The White House did a press briefing this morning to put out its case for why Mick Mulvaney is the rightful acting Director of the CFPB. I expected that the White House would argue that the Federal Vacancies Reform Act controls the succession, not the Consumer Financial Protection Act. Curiously, the White House made a different argument. The White House's argument is not that the Consumer Financial Protection Act does not provide a succession mechanism.
I want to emphasize just how irregular and probably illegal the Trump administration's attempt to make OMB Direct Mick Mulvaney the acting Director of the CFPB really is.
With the announcement by CFPB Richard Cordray that he will be leaving the agency by the end of the month, the question arises who will succeed Cordray as Director.
Time for a CFPB politics update: FSOC veto, Congressional Review Act override of the arbitration rulemaking, Director succession line, and contempt of Congress all discussed below the break.
Today the CFPB finalized the most important rulemaking it has undertaken to date. This rulemaking substantially restricts consumer financial service providers' ability to prevent consumer class actions by forcing consumers into individual arbitrations. I believe this is by far the most important rulemaking undertaken by the CFPB because it affects practices across the consumer finance space (other than mortgages, where arbitration clauses are already prohibited by statute).
The Trump Treasury Department's Dodd-Frank Act report spends more pages on the CFPB (including mortgage regulation) than on any other issue. There's a whole bunch of blog posts that one could write about the Treasury report, but I want to limit myself here to one item that has long been on the GOP/industry complaint list about the CFPB: that its power to proscribe "abusive" acts and practices is a problem because the term "abusive" is novel and undefined and that this creates uncertainty that is chilling economic growth. Total hooey.
I'm testifying before the Senate Banking Committee this week about "Fostering Economic Growth: The Role of Financial Institutions in Local Communities". It's the undercard for the Comey hearing. The big point I'm making are that the problem is not one of economic growth, but economic distribution. While the US economy has grown by 9% in real terms since Dodd-Frank, real median income has fallen by 0.6%. That's pretty grim. The gains have all gone to the top 10% and particularly the top 1%.
House Financial Services Committee Chairman Jeb Hensarling (R-Texas 5th) has an alternative fact problem. In a Wall Street Journal op-ed Hensarling alleged that "Since the CFPB’s advent, the number of banks offering free checking has drastically declined, while many bank fees have increased.
