Richard Cordray deserves to stay director of CFPB.
While bankers and their congressional allies fume that a consumer protection agency created after the financial crisis has amassed too much power, the agency keeps on doing what it does so well: putting money back in the pockets of people who’ve been mistreated by big banks, credit card issuers or other financial players.
In its six-year existence, the Consumer Financial Protection Bureau (CFPB) has collected $11.8 billion in relief for 29 million consumers from financial institutions for everything from erroneous bank overdraft fees to wrongful foreclosures. Just last week, the bureau ordered Mastercard and UniRush to reimburse holders of a prepaid card $10 million after breakdowns left thousands without access to their own money for days or sometimes weeks.
It’s no secret why financial institutions, which were coddled by the bureau’s predecessors, are screaming to weaken it. But you have to wonder why senators, whose constituents are all consumers, have joined this mission to defang the bureau, which has fought so successfully against rip-offs and for the little guy.
Could it have something to do with the more than $9 million that commercial banks and their trade association political action committees (PACs) gave Republicans running for federal office in the 2016 election cycle? That was nearly 75% of their total giving. Or that finance and credit company PACs forked over $2.8 million to GOP candidates?
For years before the 2008 financial crisis, federal consumer protection laws existed, but authority was splintered among several agencies, most of which did a sorry job enforcing them. After the crisis, in which hundreds of thousands of people lost their homes, Congress sensibly centralized this important task in one agency and gave it strong powers as part of the Dodd-Frank law that President Trump said last week he wants to dismantle.
Sen. Sasse: Fire Richard Cordray
CFPB's structure is nimble, with a single director, who can be fired only for cause, ensuring his political independence to do a difficult job reining in powerful political interests. But as soon as the bureau began flexing its muscles — setting up an efficient consumer complaint operation, resolving complaints, writing tough rules and enforcing them — Republicans began to squawk that the bureau and its director have too much power.
They’ve tried several tacks to weaken the bureau’s structure and most recently have gone after its highly effective director, Richard Cordray, whose term runs to 2018.
In a letter to the incoming administration last month, Republican Sens. Ben Sasse of Nebraska and Mike Lee of Utah urged Trump to fire Cordray, asserting that the director's authority makes him, aside from the president, “the single most powerful official” in the entire U.S. government.
They’ve got to be kidding.
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Under the law, the director can be fired only for cause: “inefficiency, neglect of duty, or malfeasance.” The senators have pinned their hopes on a 2-1 ruling in October by a federal appeals panel rejecting that part of the law as unconstitutional.
They forgot a couple things. The ruling is not final; it's on appeal and could be overturned, so the president has no such power right now. Further, the ruling conflicts with a 1935 Supreme Court decision that Congress is free to ensure that leaders of independent agencies with semijudicial powers, such as enforcing regulations and penalizing those who violate them, can be fired only for cause for the very reason that they need to be independent.
If Cordray were fired, it would be one of the few examples of an official in Washington being canned for doing his job too well.
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