In the five years since the agency’s inception, Republicans — together with Wall Street allies — have been unrelenting in their bid to defang the CFPB, claiming the agency is a primary example of administrative bloat. On Monday, the pressure intensified with a letter from two Republican senators to US vice-president-elect Mike Pence calling for Cordray’s dismissal.
They hope that a controversial case from last October, PHH Mortgage Corp versus CFPB, which ruled that the president can remove the CFPB director without cause, will be key in helping them pressure Trump into replacing Cordray with someone more sympathetic to Wall Street’s interests.
In the ABS world, market participants are generally leaning towards the taming of the CFPB, feeling that the agency has been excessive and “politically contentious” in some of its enforcement methods aimed at policing lenders. However, it has yet to be proved that the CFPB has in any way damaged the ABS market, or that weakening the CFPB will improve the quality of consumer ABS in any way.
While it can be agreed that the CFPB has employed unconventional enforcement methods against some lenders, the agency has by and large fulfilled its goal of protecting American consumers from the sort of predatory lending and unscrupulous practices that laid the ground for the financial crisis.
During last year’s Wells Fargo scandal, for example, the CFPB managed to recover over $2.5m in overdraft fees for consumers after the bank was caught secretly opening unauthorised deposit and credit card accounts on their behalf. Beyond that, the agency has also helped thousands of Americans recover approximately $11bn lost to dubious debt collection methods and other illegal practices in the post-crisis era.
Moreover, despite the ruling that the CFPB director can be removed without cause, there is no concrete reason for firing Cordray other than to further the interests of financial institutions and their political allies. Even prior to joining the agency, Cordray had been a champion of American consumer protection, helping to recover more than $2bn for Ohio’s retirees and business owners.
Without Cordray, the CFPB will lose its reputation as the country’s post-crisis consumer watchdog, opening the door for many of the same practices that precipitated the crash.