The federal agency in charge of protecting consumers is now under threat

A young consumer agency with a long list of wins faces life under autocracy.

A sign warning of predatory payday lenders leans up against a chair during a speech by Consumer Financial Protection Bureau Director Richard Cordray, in Richmond, Va., Thursday, March 26, 2015. CREDIT: AP Photo/Steve Helber
A sign warning of predatory payday lenders leans up against a chair during a speech by Consumer Financial Protection Bureau Director Richard Cordray, in Richmond, Va., Thursday, March 26, 2015. CREDIT: AP Photo/Steve Helber

They’ve gone to court to fight every flavor of modern highwayman, from payday loan companies, abusive debt collectors and for-profit college frauds to petty scammers who loot payouts from lead poisoning victims.

They’ve fought through sabotage every step of the way from Wall Street-backed politicians determined to undermine their independence.

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And for over five years, the Consumer Financial Protection Bureau (CFPB) has danced between the raindrops, uncovering proof of nickel-and-dime scams, writing new rules to derail them, and winning about $12 billion for wronged soldiers, taxpayers, and students.

But now the agency that protects Americans from financial predators big and small is facing the same unpredictably bleak future as its older, slower colleagues in the federal public service sector. President Donald Trump is the biggest threat to the CFPB’s hard-won autonomy to date.

The agency currently has at least 16 open litigation cases covering a wide range of specific allegations, from overdraft abuses by banks to robocalling debt collectors to dishonest online lenders. In the three days leading up to the new president’s inauguration, CFPB unveiled a major lawsuit against student loan servicing giant Navient and a smaller, sexier one against a banker who named his personal yacht “Overdraft.”

All that work is suddenly on rocky ground. Before he was even sworn in, Wall Street allies in Congress were already urging Trump to decapitate the agency.

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Sens. Mike Lee (R-UT) and Ben Sasse (R-NE) asked Trump to fire CFPB Director Richard Cordray in a letter last week. Lee, Sasse, and other Republican lawmakers have repeatedly tried to chip away Cordray’s authority since the agency was first founded, but have won only marginal, minor victories. With Trump in office, they hope to finally gut the place.

If Trump heeds their call, the toughest bodyguard of American wallets could be thrown into unprecedented turmoil. If not — and there are good reasons even for a mischief-minded troll like Trump to leave the senators in the lurch — Trump will still get to replace Cordray when his term expires in mid-2018.

“Obviously at some point a Trump nominated successor will take office,” Americans for Financial Reform’s Brian Marshall said in an interview. “There are tons of people who are my ideological opposite or who are bank people who are saying we’ve gotta get Trump to fire him. That’s a wishlist item, but there’s not a lot of evidence that that’s a power anybody in this new world has.”

The agency was designed to remain above the partisan tide, with a self-generating budget derived from the settlements its enforcement division wins and a uniquely limber management structure. Most heads of independent executive agencies are at-will employees of the president, replaceable at a whim.

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But the CFPB chief can only be fired for cause, a higher bar designed to ensure the agency’s work cannot be suborned by financial industry lobbyists or their favored politicians. That rule could fall pending the outcome of an ongoing legal battle, but remains in force for now.

No president has ever successfully fired an appointee for cause, Marshall has pointed out, and courts blocked all three presidential attempts at doing so. But “never” also means “not yet.” If Trump is fond of firsts, Cordray might be an appealing target.

Such an aggressive move to derail the agency’s work on behalf of exploited working-class Americans would be far out of step with Trump’s espoused economic populism, of course. True, he has already hired a half-dozen Goldman Sachs execs and multiple billionaires for key roles in his administration. But going after the CFPB would be a more direct break from his odd, lurching political brand.

“This is clearly something the financial industry would like, but it’s also a reversal of rhetoric that he would stand up for average Americans,” the Center for American Progress’ Joe Valenti said. “I can’t think of an agency that has better represented the needs of average Americans in a difficult and often rigged system than the CFPB.” (ThinkProgress is an editorially independent news site housed in the Center for American Progress.)

It’s easier for Trump to bide his time until Cordray’s appointment ends in July 2018. But that means disappointing powerful, wealthy industry donors and their sympathizers on Capitol Hill.

The agency’s foes will be especially eager to move because Cordray is only the first stone they have to move. The CFPB has relatively few political appointees, and the career civil servants who make up the vast majority of the staff will continue presenting Cordray’s replacement with damning casework, compelling data, and sympathetic everyman victims of financial abuse.

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“We’ll have to see if a new director is really going to shut down cases when the staff comes up with evidence that a bank broke the law. I have a lot of faith in the dedication and skill of the CFPB staff and their ability to put forth strong cases regardless of who’s in charge,” said Marshall. “But it would ultimately be up to a new director whether or not to move forward with enforcing the law in those cases.”

In the meantime, though, Trump can find shortcuts to granting Wall Street’s wishes. The CFPB’s in-house litigation team can only handle so much on their own. Trump has more direct and politically simpler influence over the people the agency relies on for help in court.

“It is possible that the Department of Justice in a Trump administration would not stand up for CFPB actions the same way that it has,” Valenti said. “That would make it more difficult to pursue cases jointly or to defend the agency on appeal.”

The bigger-picture tools at the CFPB’s disposal are in serious jeopardy. Trump’s appointee, whether this year or in 2018, will have immense influence over how many new rules the staff issues and how stringently it writes them.

Some of the most critical and novel regulatory tools that Cordray’s team have crafted are still not final. That creates vulnerability for many important pending rules, including crackdowns on payday lending abuses, profiteering schemes from pre-paid debit cards, debt collector harassment, and legal strongarming through forced arbitration contract clauses.

“I think on the rulemaking side of the house, you will see a very stark difference in attitude depending on who’s nominated,” Marshall said.