Trump and the CFPB

by Ramesh Ponnuru

Response To...

Consumers Harmed by Consumer Protection ...

The CFPB’s new rule on small-dollar loans will, as Iain Murray mentioned, draw opposition from Republicans who argue that it will only cut off access to credit for some individuals. It may also increase Republicans’ interest in reforming the agency and removing its director, Richard Cordray.

The agency’s insulation from accountability to elected officials—it gets its funding from the Federal Reserve, not Congress, and by statute the president cannot fire its director at will—raises constitutional questions. A three-judge panel of the D.C. Circuit Court of Appeals has ruled that the president has to have complete discretion over firing the director, but the ruling has been vacated while the full appeals court is considering the issue.

Conservatives think that this structure is ripe for abuse—and that it has been abused. (I’ve written about one CFPB overreach in the past: its regulation of car dealers.) Republican state attorneys general are particularly eager to see change at the agency. “When you have an institution with no accountability, it causes great concern,” Arkansas attorney general Leslie Rutledge told me when she was in D.C. last week. She charged that the CFPB is having a negative effect on credit, especially in rural areas.

At the same D.C. event, sponsored by the Rule of Law Defense Fund (a kind of think tank for the Republican AGs), Oklahoma attorney general Mike Hunter also called for reform. Banks were moving too many employees from customer service to compliance because of the agency, he lamented. He suggested that the judicial and executive action was a more realistic prospect than legislation. “At least with respect to the Democratic senators, there is this blank check that they have given Elizabeth Warren on bank regulation. Any reform will be demagogued—I use that word; it’s the right word—by Elizabeth Warren.”

A lot of CFPB critics are frustrated with President Trump for not having acted against Cordray. They say that even if he feels he needs cause to fire Cordray, he has plenty. Political considerations are reportedly staying Trump’s hand: A firing might help Cordray with his long-expected run for governor of Ohio in 2018. Rutledge was diplomatic about the inaction: “We’re still early into this administration.”

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