Every payday, working Americans are reminded of the multiple tax deductions that pay for government. If you’re like most people who work for a living, the biggest deduction is for federal taxes.
It’s a tax that people pay rather than face the ire of the Internal Revenue Service. It’s also an expenditure that is made with the expectation that our democracy will also live up to its promises to be “of, by and for the people.”
Yet when it comes to the current leadership at the Consumer Financial Protection Bureau (CFPB), that adage no longer applies. Instead, acting CFPB Director Mick Mulvaney has changed the Bureau from one that provided protections and restitution to scammed consumers into a full-fledged protection of financial service firms.
The unfortunate result for citizens is that we’re just not getting any value from this key office these days. The Dodd-Frank Consumer Protection and Wall Street Reform Act is clear as to the responsibilities given to CFPB. Under the previous director, billions of dollars were returned to consumers for a host of illegal and deceptive acts by predatory financial institutions. These achievements were accomplished with the support of a dedicated staff.
The only difference now is that Mulvaney has no interest in fulfilling the law as it was enacted. And for the public, we’re just not getting what the law promised. Allow me to count the ways this appointed official is cheating American consumers.
In May and at Mulvaney’s direction, CFPB announced it would end rulemaking plans to address bank overdraft fees. Overdraft fees are charged when the cost of a given transaction is more than the amount of available funds in an account.
Often marketed as a “customer service,” these fees average $35 per transaction but cost consumers an estimated $14 billion each year. Charges are incurred with ATM withdrawals, electronic bill payments, and paper checks. The financial institution repays itself with the next deposit to the account, ahead of other transactions. Many banks manipulate transaction posting orders, driving up the number of fees incurred. The consumers hardest hit by these fees are those who can least afford them: consumers who those who live paycheck to paycheck and/or maintain low balances in their accounts.
“Mulvaney’s decision to halt the CFPB from moving forward on addressing abusive overdraft fee practices will severely impact poor families and communities of color,” Rebecca Borne, senior policy counsel at the Center for Responsible Lending, said in response.
In June, Mulvaney disbanded the Bureau’s 25-member Consumer Advisory Board. Mandated by Dodd-Frank, this volunteer group meets twice a year. On Mulvaney’s watch, however, no in-person meetings were ever convened. In response to the firing of volunteers, one former CAB member, publicly commented:
“We now have a CFPB which has political advisers who essentially are not interested in protecting American consumers,” said Ruhi Maker, a senior staff attorney at the New York nonprofit law firm Empire Justice Center. “They are interested in serving those people who prey on American consumers and make profits on the backs of American consumers who have the least ability to afford it.”
Also in June, Mulvaney publicly sided with the payday industry’s efforts by joining the leading payday lenders’ association in filing a joint motion to delay the compliance date for the CFPB’s rule on payday loans for 445 days.
The average payday loan may only be $365 but comes with an average triple-digit interest rate of 361 percent and $458 in fees — payable in full, usually within two weeks. The lender requirement of full payment triggers a long-term trap for borrowers: 75 percent of all payday fees are stripped from borrowers stuck in more than 10 loans a year. Similarly, 85 percent of car-title loan renewals occur within 30 days of a previous one that could not be fully repaid. Additionally, one out of every five borrowers end up losing their vehicle to repossession.
Today, 15 states and the District of Columbia have enacted interest rate caps on payday loans. CRL research found that consumers in these states save $2.2 billion each year that otherwise would have been paid for predatory fees.
In spite of these findings, the multi-billion-dollar payday lending industry remains adamantly opposed to a rule that provides only two basic provisions: an ability-to-repay standard, and payment protections. The first requires lenders to make a reasonable determination before loan approval that consumers can afford to repay the loan. The latter provision denies lenders from taking repayment from checking accounts after two consecutive efforts failed.
Now, to make matters even worse for consumers, President Donald Trump’s U.S. Supreme Court nominee, Judge Brett Kavanaugh, if confirmed by the Senate, would be a likely ally to Mulvaney. As a member of the D.C. Circuit Court of Appeals, Judge Kavanaugh has a record of opposition to the structure of the CFPB, which he has termed to be unconstitutional. In the October 2016 ruling in PHH v. CFPB, he wrote: “The concentration of massive, unchecked power in a single Director marks a dramatic departure from settled historical practice and makes the CFPB unique among independent agencies.”
“Indeed, other than the President, the Director of the CFPB is the single most powerful official in the entire United States Government, at least when measured in terms of unilateral power,” Kavanaugh wrote. “That is not an overstatement.”
Instead of protecting consumers from predatory lenders who bilk hard-earned monies from unsuspecting consumers, Mulvaney is directing CFPB to extend his steady string of actions that benefit financial services.
Unfortunately for consumers, CFPB’s acting director is either forgetting or ignoring taxpayers who just want to be treated fairly.
Charlene Crowell is the Center for Responsible Lending’s communications deputy director.