Mick Mulvaney doesn’t want any new money for the Consumer Financial Protection Bureau, but he does want the companies whose abusive business practices put them at odds with the agency to sound off in the comments.
The acting head of the CFPB told the Federal Reserve to give the seven-year-old watchdog zero dollars in new funding for the second quarter of the fiscal year, Politico reported Thursday. The day before, Mulvaney put out a call for public comment on the agency’s investigations into consumer lending and borrowing practices — effectively an invitation for the foxes to critique the design of the henhouse.
In just a few short years, before President Donald Trump dispatched Mulvaney to take over the agency he doesn’t believe should exist, the CFPB clawed back more than $12 billion from abusive firms on behalf of their defrauded customers. Companies caught violating consumer rights have given back $7.7 billion in the form of reduced principal amounts and other loan term modifications, and another $3.8 billion in direct compensation to victims.
The agency has also collected $600 million in direct fines, which CFPB uses to cover its own costs. The remainder of the agency’s operating budget comes from the Federal Reserve rather than Congress, a structure designed to shield consumer enforcement work from partisan winds.
In his letter to the Federal Reserve requesting that it transfer no money for the second quarter, Mulvaney characterized the move as part of a government-wide effort to shrink the national debt. The roughly $150 million he asked the Fed to transfer to the Treasury instead of to the CFPB is a laughably small amount to contribute compared to the billions in positive material gains for American workers that the agency uses its budget to win. But regardless of the amount, he is enlisting a consumer watchdog in a debt crusade to which it has no statutory or practical link — a dark turn away from the agency’s purpose as frontline defender of little-guy wallets.
During Richard Cordray’s tenure as the agency’s first director, CFPB needed roughly $458 million per year on average to provide its watchdog services. Perhaps anticipating that a Trump-picked successor would seek to starve the operation of resources, Cordray sought a much larger than usual allocation from the Fed for the first quarter of fiscal year 2018.
Mulvaney pointed to that $217 million quarterly request from his predecessor in a letter notifying the central bank he wants no further funding from them for the second quarter, according to Politico’s report. But that’s a dodge. The agency has always frontloaded its annual funding asks into the first quarter. Its second-quarter Fed transfers have averaged 22 percent of annual totals since fiscal year 2011, the first full year of operations.
If Mulvaney wants 22 percent of the year’s funding to be zero dollars, it’ll be a do-nothing year for the CFPB — which is exactly what he wants.
The trusted Trump appointee has objected to the very idea of an independent, efficient, aggressive, and data-driven consumer watchdog since his time in Congress. He has already rewritten the agency’s mission statement to direct employees to work on deregulating markets, rather than enforcing regulations and crafting strong and balanced new ones to combat predatory business models. He supports legislation to strip the CFPB’s structural and budgetary independence from partisan politics. He supports legislation to reverse regulations that staff only delivered after years of researching, remodeling, and soliciting industry input — legislation that would also, in some cases, permanently prevent CFPB from even trying to regulate the business practices in question.
The Wednesday move soliciting public comment on agency practices is a subtler ingredient in the Mulvaney-Trump scheme to gut the agency. It insinuates that Mulvaney’s doing something novel, when in fact the agency has never taken regulatory action without extensive public and industry input. The body’s enforcement work — separate from the crafting of new regulations, based entirely on existing laws and rules it is empowered to police under the Wall Street reform legislation that created it — would be more easily undermined if Mulvaney can gather a dossier of gripes from the companies CFPB scrutinizes.
Together with a starve-the-beast budgeting mentality and a hostile-takeover rewriting of the agency’s core philosophy and mission, the call for criticism would give Mulvaney a fig-leaf basis for radical, destructive change from within.
“Trump agent Mick Mulvaney is inviting financial predators to help him dismantle consumer safeguards so that payday lenders and Wall Street banks once again can prey on millions of Americans,” Public Citizen’s Bart Naylor said in a statement following Wednesday’s announcement. “Now, financial firms whose business models rely on scams and rip-offs, may defang the consumer agency and write rules that invite more lucrative deceptions.”