Dear Mr. Trump: Please Don’t Destroy the CFPB
This election showed that families across the country struggle with economic instability. Millions of people still face financial challenges, and we need strong regulators to ensure that financial companies do not mistreat them. Congress created the Consumer Financial Protection Bureau in 2010 when it became apparent that financial regulators were not protecting consumers. Consumer regulation was spread across seven agencies; the authorities and focus of each agency was not keeping pace with the increasing complexity of the financial markets, particularly the imploding mortgage market.
Since its creation, the CFPB has shown what good government can look like when it puts people first. Richard Cordray, as the first director of the agency, inherited a financial crisis that impacted millions of people. Despite the uphill battle, Cordray led the CFPB in taking strong action against financial abuses, which has yielded $12 billion in consumer relief. This relief revealed abuses in a startling range, including credit card companies improperly billing for unwanted services, student loan servicers overcharging service members, and companies discriminating against minorities.
Yet from day one there has been persistent and puzzling opposition to the agency. Much of this opposition has cloaked itself in misleading terms about the structure of the agency; opponents of the CFPB say the agency is unaccountable, unprecedented and unconstitutional. They say this despite strong evidence to the contrary: every other financial agency, the first of which was created during the Civil War, has a roughly similar structure to the CFPB. Congress established independent agencies to oversee financial entities in 1863 (Office of the Comptroller of the Currency), 1913 (Federal Reserve), 1933 (Federal Deposit Insurance Corp.), 1934 (Securities and Exchange Commission), 1970 (National Credit Union Administration), 1974 (Commodity Futures Trading Commission), 1989 (Office of Thrift Supervision), and 2008 (Federal Housing Finance Agency).
Most of those agencies are not appropriated by Congress; many are subject to extensive annual audits; several of them are led by single directors; and many of their leaderships cannot be removed without cause. To say the CFPB is unprecedented simply ignores the long history of financial regulatory agencies.
Independent agencies have historically been created to protect the public while deflecting political abuse. In other words, there are certain sectors that we don't want to become tools of the president. The financial sector is one of those; product safety and federal elections are two others, with the Consumer Product Safety Commission and Federal Election Commission, respectively.
Yet opponents launch attack after attack, holding dozens of hearings and conducting investigations designed to undermine the agency. These attacks came to little more than a waste of oversight resources. Take, for instance, the prolonged attack on the CFPB's building renovation, which critics said was wasteful, even though both the General Services Administration and the CFPB's inspector general independently stated that the costs of the project were reasonable.
The latest attempt to weaken the CFPB is yet another Trojan horse to gut the agency: the CFPB's opponents' effort to convince President Trump to remove Cordray before his five-year term ends in July 2018.
The law that established the CFPB only permits a president to remove the director for "inefficiency, neglect of duty, or malfeasance in office." In October, the D.C. Circuit, however, found this clause to be unconstitutional, relying on flawed reasoning that "[n]ever before has an independent agency exercising substantial executive authority been headed by just one person." The court either ignores or takes a very dim view of the substantial executive authority the OCC, also headed by one person, has wielded for the past 150 years. The CFPB filed a petition for en banc review of the case, and final disposition of the case is expected to take at least several months.
Given the importance of independent agencies, Congress often requires the president to have a good reason to fire an agency head. Several independent agencies have leaders who can only be removed for cause, including the Federal Reserve, the Federal Trade Commission, Social Security Administration, Federal Housing Finance Agency, and Office of Special Counsel.
Furthermore, though the president has authority to remove any agency head that is not doing his or her job, no president has ever done so, as Brian Simmonds Marshall, policy counsel with Americans for Financial Reform, recently detailed in ACSBlog.
These agencies, especially the CFPB, rely upon their independence to continue protecting the financial markets, the elderly, homeowners, employees, and consumers with continuity and diligence across administrations.
Aditya Bamzai, a University of Virginia law professor, recently suggested that President Trump would be legally justified to ignore the ongoing legal proceedings and remove Cordray immediately without cause. Setting aside the merits of his legal analysis, which are debated elsewhere, his suggestion that President Trump — especially President Trump — should flout laws now and wait for someone to sue him later is not just bad precedent; it could trigger a constitutional crisis.
The CFPB under Cordray's leadership is critical to cementing consumer protection reforms. The bureau's opponents are focused on stripping the "cause clause" from the CFPB statute because it is the only way to fire Cordray before July 2018. There is no evidence that he has been inefficient, neglected his duties, or committed malfeasance. To the contrary, the agency has been extremely efficient in enforcing the law and implementing strong rules to protect individuals. We need President Trump to keep Cordray in place, as the law requires, and nominate a successor in 2018 who will put the interests of people first.
Jeanette Quick served as senior counsel to the Senate Banking Committee. Previously, she was counsel at the Office of the Comptroller of the Currency.