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Will the Consumer Financial Protection Bureau (CFPB) become a mere shell of its former self? Appears so, if Mick Mulvaney, its current Acting Director, has his way.
Since its creation, the financial institutions that it regulates have decried that the CFPB is overbearing in pursuing its mission to protect consumers. CFPB’s approach has been to regulate by enforcement of laws through the assessment of fines and penalties.
The financial community believes that through their rules, regulations, and enforcement, the CFPB has done more harm to consumers than good by restricting their access to much-needed capital.
The CFPB was created to centralize supervisory authority, rule-making, and enforcement activity under one agency. The various agencies previously having such powers still exist and they also can enforce laws and pursue actions against violators. Seems like a duplication of effort and expense.
So why create the CFPB? Good question, why couldn’t the existing agencies monitor and enforce any new rules promulgated under Dodd-Frank? I guess Congress didn’t trust them to do so.
A good, old-fashioned Washington, DC power struggle in which the consumers and the institutions regulated get caught in the middle. Some win, some lose, and others are left to sing the blues.
Mulvaney says give the enforcement power back to the State Attorneys General, the Office of the Comptroller of the Currency, and the Federal Reserve.
The AGs applaud the move while consumer advocates are somewhat skeptical. Mulvaney says he believes the AGs are better suited to handle matters in their jurisdictions as they are much more familiar with the particulars in their state.
Consumer advocates fear that with CFPB stripped of much of its power, things may regress to the days prior to the 2008 crash.
Financial institutions may be relieved of some of the excessive enforcement procedures and penalties used by the CFPB. However, in most cases the devil you know is better than the one you don’t.
Might the OCC, Fed, and/or the AGs be more stringent in their auditing and enforcement actions? Could things get worse? State AGs and other regulatory entities may decide to pursue actions that the CFPB may not.
Financial institutions will once again face a patchwork of various rules and regulations, depending on the states in which they do business and the other agencies by which they’re governed.
Either way, lenders will be closely monitored for compliance with all consumer laws governing loan originations, whether enforced by CFPB, State AGs, or some other agency. Lenders need to continue to do the things that have improved the quality of the mortgage loans they are now originating.
There’s no going back. We shouldn’t need a watchdog to ensure we do things right and for all the right reasons.
Please continue to lend responsibly my friends…
