CFPB was wrong – even before abusing the power of

Last week I participated in the radio broadcast At the point To discuss the legacy of the Financial Consumer Protection Office. It turned out to be a conversation with Richard Cordray, the first CFPB director.

I argued, as I did for more than a decade, that the creation of a new government consumer protection service was never necessary. Cordray, of course, disagreed.

One of the funniest things was that Cordray, a career politician, acted embarrassed that CFPB ended existence A “party political issue”. I heard him make his case before, so I was not shocked to hear Cordray blame this politicization of the “big financial companies”.

This is quite sad, but Cordray’s reasoning about why it was necessary to create the CFPB in the first place is worth a comedy award. According to Cordray, “we need this service” because “Congress has passed a law and spent a year of worker for this law”.

So if Congress eliminates the CFPB next year, it means we don’t need it. Case closed. I am sure Cordray would immediately stop telling everyone that CFPB is crucial to consumer protection.

My reasoning, however, is based on a practical view of the law and on what various consumer supporters want before Congress created the CFPB in 2010.

Most supporters wanted checks, not CFPB

For beginners, Congress created the bureau, giving it the principle of enforcement for about 50 different federal rules that caused from 22 consumer protection statutes. (Yes, I leave all the laws on consumer protection.

It is undoubtedly undoubtedly that these federal laws, many of which were passed in the 1960s and 1970s, were imposed.

A 1984 Federal Reserve exhibition provides only a distant example. The document details the Fed’s efforts to improve the enforcement of various consumer protection laws and shows that the Fed received a total of 2,487 consumer complaints in 1983 (until the year 2000, the number of complaints associated with Fed members had fallen a little.)

These laws were also undoubtedly imposed outside the banking industry. In 1999, for exampleFTC imposed a fine on Franklin Acceptance Corp $ 800,000 to settle the charges violated the law on the same opportunity.

Even unhappy supporters do not shout for CFPB

While these measures did not fully satisfy supporters of consumer economic protection, these peoples generally do not shout about a new government agency before 2010. Until that time, various articles discussed ways to protect consumers from the supposed spread of “predator”. But these articles usually argued that the solution was to limit lenders to charge high points and fees, which could easily be done within the existing legal framework.

For a single example, take former Senator Paul Sarbanes (D-MD) Consumer Protection Act of 2000. paper He explains, the basic regulation of the Consumer Protection Act placed a stricter limit on points and fees.

Legislative details are even more revealing.

The law would have amended the law on ownership and protection of 1994 equivalent funds, a law that amended the law of truth to the 1968 lending. It would not have created a new federal service. Ironically, the Sarbanes bill would have expanded the types of restrictions and “protections” initially implemented by the 1994 HOEPA law.

Many consumers have been fighting for either de facto price checks or explicit price controls to “protect” consumers for decades. These groups have constantly pushed for extensions of consumer protection laws, and with every little victory, they have pushed harder. Still, there was no wide impetus for a new federal service.

The 1974 equal credit law provides a clear example of lawyers’ Playbook. As with other consumer protection statutes, Congress has given the ECOA enforcement principle on banking services, FTC and DOJ. But like this in 1984 Florida University Law Review article The broadcasts, consumers’ supporters, received the exception of the lack of discrimination that followed the ECOA.

CFPB is not necessary to combat discrimination

Instead of being considered that discrimination may not have been as ruthless as supposedly, supporters are promoted for reforms, such as increased funding for enforcement, facilitating the plaintiffs to bring lawsuits to ECOA and providing a “minimum recovery of $ 500” after proof of ECOA breach. The author even complained that the “increasing use of creditors’ rating systems” made ECOA’s “reckless violation” more difficult.

Just as the writer argued in 1984, my point is that if These types of “protection” were necessary, they could easily be applied by simply amending existing laws. There was no need to create a new federal service. This is the same position that most consumers’ supporters took before the financial crisis of 2008 and nothing that happened during the crisis changed this logic.

Even the specialized mortgage rule, applied by Dodd-Frank and given to CFPB for enforcement, essentially applies to Hoepa-like restrictions. There is no reason that one of the many existing federal organizations could not impose these restrictions or other provisions on the protection of consumers given by the Congress on CFPB. And this argument has nothing to do with whether the CFPB, under any of its previous directors, has overcome its power.

CFPB unnecessary, even when you don’t exceed

For any reason, however, Cordray (and the host of At the point) suggested that my arguments depend on CFPB “Overcoming all the time”. But I didn’t make such a claim.

Still, since they brought it: Yes, CFPB has exceeded.

One of the first examples was Cordray’s decision to change the long -term interpretation of the 1974 real estate settlement law. Cordray decided to retroactively Apply a new interpretation and a slim PhH Corporation $ 100 million for a Breach from the Respa. It is no surprise that Circuit DC Court of Appeal establish that Cordray’s actions “violated the principles of fair procedure”.

There are many other examples exceed In the office, including (according to a federal judge in 2017), the “blatant violation” of CFPB of a court discovery commands. Also, in 2017, a federal court dismissed a CFPB complaint about “failure to meet the few actual production standards that lacked the fair notice company for the reasons for the bureau”.

There are many more examples, but the main reason CFPB should not have been created is that it was superfluous. This is separate from whether the office exceeded its power or if it had to be adjusted under a different structure.

It is a legal function for the government to protect people from cheating or cheating. This is what the law enforcement must do. But Congress did not have to create a new federal service for this purpose. Many government agencies, both at federal and state level, have already done so.

The question that Congress must have discussed before creating CFPB is the reason why FTC, the federal service whose slogan is Protection of America’s consumerscould not protect consumers of America. I doubt that this would be tougher than discussing Cordray about whether Congress should have created the CFPB.