Would CFPB Have Been Free to Pursue the Payday Lender It Fined $5 Million Yesterday If Congress Controlled its Purse Strings? The Same Lender Showered Members of Congress with More Than $200,000 in Campaign Cash Since 2010.
WASHINGTON, D.C. – Last night, the House Appropriations Committee voted to compromise the Consumer Financial Protection Bureau’s (CFPB) budgetary independence by putting it under the highly-political Congressional appropriations process rather than maintaining its current funding model. The move followed news that the CFPB had fined a payday lender $5 million in a case initiated under the Bureau’s previous director Richard Cordray. The same lender has contributed more than $200,000 to members of Congress over the years. In response, Allied Progress released the following statement and reality check:
“The clear mission of the CFPB is to act in the public interest. How in the world can it fulfill that mission if Wall Street lobbyists who have showered Congress with piles of campaign cash are able to cajole them into cutting the funding it needs to enforce the law and protect consumers? These D.C. politicians shouldn’t be undermining the CFPB’s budgetary independence, they should be reinforcing it,” said Karl Frisch, executive director of Allied Progress.
He continued, “Just yesterday a shady payday lender was fined $5 million by the CFPB for its unethical and unlawful collection practices – an effort that began under the Bureau’s previous director. This same company has given members of Congress more than $200,000 in campaign cash over the years. If Congress had control over the CFPB’s purse strings, I have serious doubts that the Bureau would have had the freedom to pursue justice on behalf of these consumers.”
“The CFPB does not use our tax dollars. In fact, it has returned billions of dollars to tens of millions of taxpayers from the big banks, predatory lenders, and other financial bad actors that have screwed them over. If Congress gets in the way of that, consumers won’t have anyone fighting these powerful special interests on their behalf,” he concluded.
Yesterday, the CFPB fined a payday lender $5 million for bad practices. This outcome may have been different if Congress had a say after the company showered members with over $200,000 since the 2010 election cycle. [Press Release, “Bureau of Consumer Financial Protection Settles With Security Group, Inc.,”Consumer Financial Protection Bureau, 06/13/18; “Search of Security Finance Corporation Of Spartanburg And Affiliates Political Action Committee,” CQ RollCall Political Moneyline, 2010 – 2018, accessed 06/14/18]
REALITY:The CFPB’s budgetary independence is a key element of its financial regulatory independence.
The CFPB’s “budgetary independence…allows the CFPB to be on par with other financial regulators” with independent funding. That independence is “a key element of financial regulatory independence, providing additional freedom to make difficult regulatory decisions.” Fannie Mae and Freddie Mac were less stringently regulated in part because of Congressional pressure on their regulator. [Aaron Klein, “Why the CFPB showdown threatens the independence of financial regulators,“Brookings, 11/28/17]
REALITY:Under current law, the Bureau is funded by the self-financed Federal Reserve.
When the CFPB completed office renovations in the past, Republicans “cast the project as a misuse of public dollars in a time of tight budgets. ‘The CFPB is funded by the Federal Reserve, which happens to be taxpayer money,’ Hensarling said in a February speech that denounced the renovation. But the Federal Reserve is self-financed, largely with income on securities such as government bonds…” [Karen Weise, “Republican Attacks on a CFPB Office Renovation Don’t Add Up,” Bloomberg, 07/10/14]
REALITY:Giving Congress total control of the CFPB’s funding would “sabotage the CFPB’s independence.”
As the National Association of Consumer Advocates noted, giving Congress total control of the CFPB’s funding would “relegate it to the politically charged, corporate lobbyist-influenced congressional appropriations process” and would “sabotage the CFPB’s independence.” Additionally, “The CFPB needs the independence that Federal Reserve funding provides to pursue its public-interest mission to protect the financial markets and its participants. Its independence is critical because the CFPB’s mission and goals often diverge from the rich, politically powerful financial industry interests it oversees.” [Christine Hines, “Congress should not hold CFPB hostage in budget talks,” American Banker, 01/25/18]
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