The Remarkable State of the CFPB

On June 28, a group of trade associations (which did not include BPI) sent a letter to the CFPB in response to its recently published examination manual. Statements in that manual reflect a significant reinterpretation of federal consumer law, and a significant expansion of its reach in substance and scope. The CFPB had not published the manual for public comment, though it appears to view it as legally binding. The letter raised substantive and procedural problems raised by the manual.

The response of the CFPB was remarkable. Asked by Law360 for a response to the letter, the CFPB responded as follows:

“Scare tactics orchestrated by lobbyists for Big Tech and Wall Street won’t deter the work of the CFPB to enforce the law,” the agency’s spokesperson said. “Big corporations and their lobbyists want to preserve a system where American families and small businesses are left to fend for themselves against those that repeatedly violate the law,” the spokesperson added.[1]

Of course the rhetoric in that statement is fully consistent with the rhetoric of the CFPB’s Director, who speaks in terms of “hidden” and “junk” fees to which banks have “an addiction.”

Leaving aside substantive debate on the CFPB’s policy, it is worth pausing to note just how unprofessional that statement is. For anyone who has ever worked at the Federal Reserve Board, the OCC or the FDIC, the idea of their leadership issuing such a statement is simply unimaginable.

Professional regulators welcome public comment (and I speak as a former regulator who read thousands of comments on dozens of proposed rules). They certainly note any special interests of the commenter but examine the law and the facts contained in the comment. They do not demonize commenters and dismiss their ideas out of hand. They do not portray the industries they regulate, and the people who work in them, as evil. They recognize that not everyone who works in an industry or has a critical view of an agency position is a “lobbyist.” They further recognize that people who work in a regulated industry are uniquely positioned to provide insights on the practical effects of a regulation. Even when they believe that industry criticism is unjust (as it sometimes is), they take it in stride and respond with evidence rather than resorting to personal attacks. They are professional about it.

Of course yesterday’s CFPB statement is false and misleading. Letters such as the one that the CFPB received are not written by lobbyists; they are written by lawyers, after consulting the executives who run the businesses affected by the agency action. The banking (and I presume technology) industry is not filled with people who repeatedly violate the law, or prey on defenseless consumers. Successful businesses craft products that are valuable to consumers, and they retain those customers by serving them well.

A hallmark of responsible regulation is objective evaluation of data and other evidence, including real-world perspectives on the impact of proposed rules. Such statements demonstrate the opposite: how preconceived notions or political agendas can influence the important work of an agency.

[1] Jon Hill, “CFPB Urged To Scrap Anti-Bias Revamp Of Exam Manual” Law360 (June 28, 2022).