The Consumer Financial Protection Bureau (CFPB) is operating like the secret police did in Nazi Germany, Rep. Dan Webster (R-FL) said at a Rules Committee hearing on Monday evening.
“This is more than just NSA-style, this is more Gestapo-style collection of data on individual citizens who have no clue that this is happening,” Webster said, speaking of data on credit cards, loans, and credit scores collected by the agency that have exposed a wide variety of financial industry abuses in its first years of existence.
House Financial Services Committee Chairman Jeb Hensarling (R-TX) responded by rattling off statistics on how many individual records CFPB has access to and echoing Webster’s concerns. While “I’m not here to ascribe malevolent intent to the CFPB,” Hensarling said, “I would just submit that this is an incredibly dangerous precedent for an agency that is totally unaccountable to the American people, and I thank the gentleman for asking about it.” The committee later sent a bill undermining the CFPB’s autonomy and making it nearly impossible for the agency to collect any market data on to the whole House for a vote.
Hensarling’s and Webster’s concerns are misinformed, according to detailed CFPB responses to questions about its data collection work from last summer. The agency “does not monitor the accounts of particular consumers and does not track the financial habits or activities of any individual consumer,” it wrote. The only time the agency looks at identifiable, individual consumer data is when pursuing a specific complaint from a consumer or enforcing a specific remedy agreed to by a company — situations that require an individual to volunteer his data.
What the agency does do is analyze mass quantities of financial industry information that has been made anonymous and then use that data analysis to understand how the market for various financial services really functions. That analysis is key to the organization’s core function of protecting consumers from a voracious industry that runs on fine print, jargon, and the manipulation of its customers.
In less than two years of operation, the CFPB has exposed major flaws in federal efforts to help young people get out from underneath student debt, ongoing abusive tactics used by mortgage servicers, a return to deceptive advertising for loans by major banks, and the lack of accountability in the debt collection business. The agency has forced three credit card companies to refund over $500 million in illegal and deceptive fees, and it won refunds on a multi-million-dollar swindle in the payday lending industry that harmed more than 14,000 borrowers in Ohio. The bureau has returned a further $2.6 million to consumers just by monitoring mortgage company business practices. The agency’s data collection work has facilitated many of these victories and is key to the broader effort to police credit card companies and other financial actors.
Republicans have sought to undermine the agency since its inception, and the bill Webster and Hensarling discussed on Monday night rehashes several of those same old ideas, such as replacing the independent agency’s head with a five-person commission and making it easier for the Treasury Department to ignore the CFPB’s regulatory decisions. Putting CFPB decisions to a commission vote would give Congress greater ability to interfere with the agency’s operations because the voting group would be subject to Senate confirmation. Commission structures at other agencies have undermined elements of Wall Street reform such as derivatives regulations, and the CFPB’s unusual strength derives in part from its independence.
Republicans have won favor with the banking industry in recent years for their work to undermine the CFPB. With the National Security Agency’s bulk data collection practices in the news now, the agency’s opponents are wrapping the old ideas in new rhetoric.
Webster’s office apologized for the congressman’s Gestapo comparison on Tuesday. Webster “realizes that in his passion to speak out on this wrong, his comparison was incorrect, and he apologizes for the use of that word in this context,” according to a statement his office gave the the Orlando Sentinel.