CFPB Gets Interesting Again

September 19, 2019 at 9:23 am Leave a comment

Following the ascension of Director Kraninger, the CFPB was in danger of becoming a typically low profile bureaucracy. Fortunately for those of us who need blog content, it’s getting interesting again.

First, it announced that it would not defend itself against charges that its leadership structure was unconstitutional. Second, it explained its plans for the continuing use of the dreaded consumer complaints database, about which I have long complained. I can’t believe she’s not taking my advice.

First, let’s get up to speed on the issue of the CFPB’s constitutionality. Starting with the D.C. Circuit’s short lived majority opinion by then-Judge Kavanaugh, opponents of the agency have argued that the director of the CFPB should serve at the will of the President. In contrast, the director can only be removed for cause, meaning that he or she can act independently of the President. I delve more into the constitutional issues in this blog.

Although the D.C. Circuit effectively decided to reverse Justice Kavanaugh’s initial ruling, the logic he laid out has inspired other litigants to make similar claims. There is currently a case pending before the Court of Appeals for the Second Circuit, which has jurisdiction over New York, but the case that has everyone’s attention is CFPB v. Seila Law LLC., in which the Ninth Circuit upheld the CFPB’s management structure. Earlier this week, the CFPB joined with the Justice Department in refusing to defend its existing structure. The Director is joining with some of the Bureau’s worst critics to argue that she has too much job protection.

In a speech in Illinois yesterday, she explained that it’s important to get the uncertainty about this issue resolved, and, in any event, if the Court does rule in favor of the Bureau’s critics, work will still go on as usual. She stated her “decision to no longer defend the removal provision does not mean that the Bureau will stop its work. Far from it. I remain fully committed to fulfilling the Bureau’s statutory responsibilities. We will continue to defend the actions that the Bureau takes now and has taken in the past.”

She also used this speech to announce that the Bureau’s publicly available consumer complain database is here to stay, although with a few tweaks. I’ve never been a big fan of this publicly available database. While it is of course crucial for the Bureau to collect information about and respond to consumers, as anyone who has spent any time at all in or around a financial institution knows, there should be a mechanism for separating legitimate complaints from the rantings of wackos. Furthermore, the database is by definition a self-selecting source of information in that the people most likely to use it are those dissatisfied with its services, and do not necessarily represent consumers as a whole. For example, I’m sure there are a lot of complaints about overdraft fees from dissatisfied customers; with few comments from consumers who consistently tell credit unions that they want and need overdraft protections.

In her speech yesterday, the Director said she was going to take steps to put the information in its database in better context. Specifically, the Bureau plans to enhance the system by using more graphics, and it also is going to encourage consumers to use other parts of its website where their gripes can be more constructively dealt with.

Entry filed under: Legal Watch, Regulatory. Tags: , , , , , , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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