- The Washington Times - Monday, November 27, 2017

With billions of dollars in penalties, fines and new regulatory costs at stake, it’s not surprising that the Consumer Financial Protection Bureau has become the nexus for the latest constitutional clash of the Trump era.

The fight over competing claims to be the acting director, which broke out this weekend and continued in court on Monday, is the third major constitutional battle to break out over the board, which was created only seven years ago but has been continuously mired in controversy.

With broad powers to investigate and fine the country’s biggest corporations, the CFPB is the most feared financial regulatory agency, drawing praise from Democrats and fierce opposition from Republicans.

But it’s the unprecedented independence of the bureau and its director that has landed the agency in legal hot water time and again — including now, where both a Trump pick and an anti-Trump pick lay claim to being the acting director.

“The CFPB is this very unique, very unaccountable agency that really is unlike any others. You have, as we see now, a single director that is not accountable to really anyone,” said Meghan Milloy, director of financial services policy at the right-leaning American Action Forum.



The forum says the CFPB has imposed $3.1 billion in regulatory costs on businesses since the bureau formed in 2010 and added more than 24 million hours of paperwork burden to the economy.

It also has issued billions of dollars in fines and additional penalties, targeting some of the country’s best-known corporations.

Last year, the CFPB issued a $100 million fine against Wells Fargo & Co. after reports that the bank had illegally opened accounts in customers’ names without their knowledge or approval.

Last week, the bureau slapped Citibank with $6.5 million in fines and penalties for misleading student loan borrowers about tax benefits and wrongly charging late fees.

Those moves have drawn cheers from Democrats and many consumer rights advocates, who say the bureau has brought a much-needed cop to police Wall Street, and who fear President Trump is trying to undercut that with his move to name a top lieutenant, Mick Mulvaney, to be acting director.

“The CFPB should be led by someone who believes in its mission, someone who is committed to working around the clock on behalf of consumers, not by a part-time director who clearly disdains this agency,” said Senate Minority Leader Charles E. Schumer, New York Democrat.

Democrats are instead backing Leandra English, who was named deputy director Friday. She says that move gives her, not Mr. Mulvaney, the power to be acting director after Richard Cordray resigned.

Both sides were in federal court Monday to argue the case — the third time the director’s position has been the subject of a major constitutional battle.

The first time was in 2012 when, after years of battling congressional Republicans, President Obama used recess appointment powers to name Mr. Cordray the director.

The Supreme Court would later rule, in a parallel case, that the recess appointment was unconstitutional. But Republicans had acquiesced by then and voted to give Mr. Cordray a full five-year term.

Another legal battle is continuing in the U.S. Circuit Court of Appeals for the District of Columbia, where a three-judge panel has ruled the structure of the CFPB to be unconstitutional.

The board vests all of its power in a single director, appointed for a five-year term and impossible to remove except for good cause, putting him beyond the immediate control of the president. The CFPB also writes its own budget, putting it beyond control of Congress’ power of the purse.

That arrangement was by design, with Democrats saying it gave the bureau needed independence to police corporate interests.

But the three-judge panel said it was an unaccountable bureaucracy, breaking with the principles of democratic government. The full D.C. circuit is now pondering the case.

Meanwhile the agency remains under attack for the way it operated under Mr. Cordray.

Ms. Milloy said her organization has calculated that the real losers from the CFPB’s actions are local community banks. She said the American Action Forum has seen a pattern of local banks closing and few banks opening.

She also said the agency is efficient at rolling out regulations, at a rate more than three times faster than other agencies.

“They are just steamrolling them through as quickly as possible,” she said.

A Government Accountability Office report in November 2016 shows that the CFPB routinely maintains a reserve civil-penalty fund of more than $100 million — critics call it a “slush fund” — to compensate future consumer claims, to pay administrative expenses or to publish educational material for consumers. The money is collected from fines imposed on businesses for harming consumers.

In many instances, the CFPB’s bureaucrats decide that there are no more “victims” to be compensated in a given investigation.

For example, the GAO found that as of Sept. 30, 2016, the agency’s civil penalty fund had an “unallocated balance” of $170.1 million.

The report showed that for the six-month period ending in March 2016, CFPB imposed civil penalties against businesses in 18 cases. But 15 of those cases involved “classes of eligible victims with no uncompensated harm that is compensable from the Civil Penalty Fund,” the GAO said.

The report also noted that CFPB dipped into the fund around this time to take $1.5 million for “administrative expenses.”

By the end of fiscal 2016, the report said, a total of $73.4 million had been distributed to “harmed consumers” from the civil penalty fund.

With some of the money, the CFPB typically publishes consumer reports six or more times per year.

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