The latest chapter in the partisan war against the Consumer Financial Protection Bureau involves claim by House Republicans that Director Richard Cordray may have violated federal law that governs agency rulemaking procedures.
The accusations are outlined in an investigative report released by Republican members of the House Financial Services Committee.
The report, based on internal CFPB documents obtained by the committee, “uncovers several potential legal problems with the Bureau’s 2015 rule authorizing it to regulate the auto lending market.”
Among the allegations contained in the report:
Cordray failed to heed the counsel of Bureau attorneys who advised him to publish a list of institutions subject to the proposed rule and to re-open the public comment period after it had closed.
Despite the recommendations of CFPB attorneys who warned of the legal implications of failing to re-open the comment period, Cordray approved issuing the Final Rule without disclosure and public comment on the data underlying the rulemaking.
Under recent Supreme Court precedent, the CFPB’s use of the “disparate impact” legal theory in enforcement actions against auto financers would not survive judicial scrutiny.
“Fuzzy logic and false comparisons are unfortunately prevalent in the CFPB’s auto-lending actions,” the report says. “In every aspect of the CFPB’s auto-lending actions, the CFPB’s lack of rigor leads to unsupported and unreliable conclusions.”
This is the third investigative report released by committee Republicans over the last 14 months about the CFPB’s efforts to regulate auto lenders. The first, issued in Nov. 2015, claimed that Cordray was aware the statistical method it used to allege racial discrimination in auto lending is “prone to significant error” and that Bureau lawyers had warned him of the “weakness” of the disparate impact theory it relied upon to build discrimination cases against auto lenders.
The second report, issued in Jan. 2016, alleged that Cordray approved the distribution of $80 million in settlement proceeds from a discrimination case without verifying that the recipients were eligible to receive the money. “The result was that some white borrowers received settlement checks over alleged racial discrimination against African-Americans, Hispanics and Asians,” it claimed.
“Once again we see the CFPB is a dangerously out-of-control, unconstitutional and unaccountable bureaucracy. It is a case study in the overreach and pathologies of the regulatory state run amok. The Bureau routinely abuses and exceeds its authority, robs consumers of their economic freedoms, increases consumer costs and often attempts to hide information from the public,” Committee Chairman Jeb Hensarling (R-Texas) said in a statement.
The latest attack on the Bureau follows a full-throated defense of its work and Cordray’s leadership by Democrats on the Senate Banking Committee. They emphasized “the need for his leadership at the agency in President Donald Trump’s Administration.”
In a letter to Cordray, whose term expires in July 2018, the senators highlighted his accomplishments. Since opening its doors in 2011, the CFPB has returned nearly $12 billion to the pockets of 29 million Americans who have been cheated by shadowy debt collectors, for-profit schools, and payday lenders, according to the agency. That total is in addition to tough fines against banks, including the $100 million Wells Fargo paid the federal government for its fraudulent accounts scheme.
The senators also noted recent polling that shows 71 percent of Americans, Republicans and Democrats alike, approve of the CFPB’s mission. They claim that, according to one survey, 55 percent of Republicans who voted for President Trump believe that the CFPB should either be left alone to continue its work or given expanded authority.