WASHINGTON — Things have gotten personal.
President Donald J. Trump has been reversing Obama White House policies since the moment the former real estate tycoon took office last year. But rarely was there personal criticism directed from this White House to the former department heads and agency directors.
But from the lips of Trump to the computer keyboard of his budget director, Mick Mulvaney, leading Republicans have now personally blamed one Obama appointee — Richard Cordray — for representing so much of what they are trying to change.
Technically speaking, Mulvaney did not use Cordray’s name in an “all hands” memo last week to the staff of the Consumer Financial Protection Bureau, which the budget chief has been running on an interim basis since Cordray’s November resignation.
But by pointedly stating his philosophical and enforcement differences from those of “my predecessor,” by paraphrasing and attempting to quote that predecessor, and by spelling out dramatic change, Mulvaney made it clear.
Cordray is gone. So are his aggressive, pro-consumer and, Republicans say, anti-business ways.
“Simply put, the days of aggressively ‘pushing the envelope’ of the law in the name of the ‘mission’ are over,” Mulvaney, a former conservative congressman from South Carolina, told the staff.
Cordray, a Democrat, happens to be running for Ohio governor, and Republicans know they can score double political points if the criticism hurts that endeavor, although Cordray still must win a primary that isn’t a sure thing. But this is more than just political name-calling. The criticism and the changes at the CFPB present a textbook-ready set of contrasts between core beliefs of Republicans and Democrats, conservatives and liberals, business groups and consumer activists.
Cordray was the nation’s first consumer financial cop. So much of what he did represents all that is antithetical to Republican belief. The Trump White House now is working quickly — some say furiously — to reverse that.
Why the controversy now?
Cordray had never actually used the “push the envelope” quote Mulvaney attributed to him, but he has since agreed: He pushed the envelope, proudly so, for consumers.
He tried to clamp down on payday lenders, give bank and credit borrowers more rights to file class action cases, fine car companies for charging higher interest rates to minorities, make bill collectors stop their threats and abuses.
“I actually thought that the marketplace was pretty imbalanced when the consumer bureau was first created and financial institutions did not have someone looking carefully over their shoulder to look after the interest of consumers,” Cordray told Cleveland.com in a telephone interview.
“We talked a lot about standing on the side of consumers to make sure they were treated fairly, and that was how I saw the role… Did we push the envelope to make sure that big banks and debt collectors and payday lenders treated people fairly? You bet we did.
“And I have no apologies for that, and I still think it was the right approach.”
Not everyone agrees. It’s not that the banks, the mortgage companies or even the payday lenders are always right, they say. But they’re not always wrong, either.
“He never gave the benefit of doubt to anybody in the industry,” said Alan Kaplinsky, a Philadelphia-based attorney who represents financial institutions and helped launch the blog CFPBMonitor.com. “He would pay lip service to claiming that he had an open mind when it came to listening to the industry, but the reality is that he had an agenda and was very pro-consumer, and that’s what he did.”
“Thankfully,” said Blaine Kelly, the Oho Republican Party’s communications director, “Director Mulvaney has begun to rein in this rogue agency since Cordray quit to run for the Democrat nomination for governor.”
Ohio Republicans have therefore been preparing the book — their version — on Cordray and all their party says he got wrong.
“Richard Cordray’s motivation as director of the CFPB was not a desire to protect consumers, but to advance his own political agenda,” Kelly said. “With no oversight, unlimited funding and marching orders from Elizabeth Warren, Cordray turned the CFPB into a political machine.”
Republicans like to mention Warren because the Democratic senator from Massachusetts is something of a liberal icon, and her name triggers a reaction in the GOP. But in this case, Warren helped establish the CFPB, launching the idea when she was a Harvard professor and coming to Washington to help President Barack Obama get it started. Cordray came on at first as her chief enforcement officer, then was nominated by Obama to be director.
What did he do right, or wrong?
Here is a nutshell version of the focus of all this criticism — and the reasons Democrats say Cordray should be praised, not criticized:
Cordray made mortgage lenders explain their terms in plain English. He got millions in settlements for borrowers from auto lenders he accused of racial discrimination through their use of dealer markups, or discretion given to dealers to set interest rates.
He nailed debt collectors for abusive collection practices.
In one of his final acts before resigning in November, he finalized a federal rule to limit payday lenders, whom he accused of putting borrowers in “debt traps.” The lenders said they gave low-income workers temporary help with short-term loans until payday, but Cordray and other critics said they trapped borrowers in a cycle of debt. The rule was going to limit serial payday loans and make lenders verify the borrowers’ ability to afford repayment along with other household expenses.
Earlier, Cordray declared banks and credit companies could no longer keep people from filing class action lawsuits over bank fees or other complaints. The was meant to end the standard bank practice of making consumers go to arbitration or sue one at a time rather than banding together with big lawsuits.
Cordray and his agency did all this without being directly accountable to the White House or Congress, although Congress in October passed a bill to rescind Cordray’s arbitration rule.
Cordray was able to exercise an unusual level of independence because that’s the way Democrats in Congress wanted it when they ruled Capitol Hill — before power reverted back to Republicans in later elections.
They created the consumer finance bureau as part of 2010 legislation aimed at preventing another financial crisis like the one of 2008, when banks were accused of loading home buyers, the credit markets and the economy with debt they knew couldn’t or shouldn’t be sustained. The economy nearly crumbled from the weight of bad mortgages and mortgage-backed securities, requiring a bailout of major banks.
“The bureau is designed to be relatively independent from special interest influence,” said Karl Frisch, executive director of Allied Progress, a liberal group that has decried the changes since Cordray left. “That’s why it’s not tied at the hip to the president, and it’s why it’s not relegated to congressional meddling.”
The consumer bureau says it has gotten at least $12 billion in relief because of lenders and credit companies’ abuses, helping 29 million consumers.
“That’s success,” Frisch said. “Somebody shouldn’t look at that and say, ‘Boy, those companies really had to pay, how do we stop them from paying for the bad things that they do?'”
Did Cordray go too far?
To Republicans, bankers, auto dealers, payday lenders and credit card companies, Cordray and his bureau went overboard. He went “well beyond the limits that those of us in the industry thought were the jurisdictional limits of the CFPB,” Kaplinsky said.
Despite the millions of dollars he recouped for borrowers from car lenders, for example, Cordray never proved actual discrimination. Instead, he relied on statistical analyses that showed a pattern of racial minorities paying higher interest rates when dealers had discretion over interest rates. The National Automobile Dealers Association said other factors could account for those differences and, as a result of Cordray’s practices, car dealers who originate loans became afraid to offer financial discounts that could save buyers money.
When mortgage lender PHH Corp. was accused of steering borrowers to mortgage insurers in exchange for kickbacks, Cordray fined the company $109 million. That was nearly $103 million more than an administrative law judge had recommended. Cordray’s CFPB said the much higher sum was warranted because the kickback payments were much more extensive than the administrative judge had factored. This prompted an ongoing appeal from PHH over Cordray’s use of his power.
Cordray got records from businesses by issuing what are known as civil investigative demands, without need for subpoenas or court orders, when he suspected they were up to no good. He played investigator, judge and jury, with zero accountability, critics said.
Cordray says the way he went about this was not unusual and that federal investigators and many state attorneys general do the same thing, gathering information so they can determine whether a business’s practices demand closer scrutiny and legal action. But Mulvaney said in his staff memo that the weight of a multi-year civil investigative demand can be financially challenging, and “if a company closes its doors” under that weight, “you and I will still have jobs at the CFPB” but “what about the workers who are laid off as a result? Where will they go the next morning?”
Even Cordray’s last day on the job didn’t end without controversy. Before leaving, he appointed a deputy director, Leandra English, to execute a succession plan, hoping his hand-picked successor could continue his mission until his five-year term ended this July. Whether Cordray had the legal right to pick a successor, even a temporary one, is now playing out in a federal court case, and in the first round, Trump, who appointed Mulvaney to run the agency on an interim basis, won.
Is Mulvaney going too far the other way?
Mulvaney has been acting director for two months. In that time, he has:
- Delayed by a year a Cordray rule that would give consumers more information about hidden fees on prepaid cards, which are similar to debit cards, and adjusted a related rule that would have broadened consumer rights if cards were lost or stolen — partly by putting more responsibility on the card issuers.
- Issued a request for information on the bureau’s use of civil investigative demands, saying there is a need for a balance between the bureau’s right to get information “while minimizing burdens” on business. Since businesses say these demands result in intrusion and erosion of their rights, Mulvaney will likely get a flood of complaints from businesses urging the CFPB to back off.
- Asked the public for “evidence” to determine how the bureau does its job and whether it oversteps legal bounds and tramples the rights of its targets. Mulvaney’s words made clear where he stands: “Much can be done to facilitate greater consumer choice and efficient markets, while vigorously enforcing consumer financial law in a way that guarantees due process.”
- Told the Federal Reserve Bank not to send the CFPB money this quarter, saying the bureau has enough in its rainy day fund to cover costs. The CFPB gets its budget from the Fed rather than from Congress, a way designed to protect it from political meddling. Democrats and consumer groups say they fear Mulvaney will cut spending and enforcement. Mulvaney said when telling the Fed not to send money that since the bureau has money in its reserves, the Fed — and indirectly, the federal Treasury — will save this way, and that’s a responsible thing to do for taxpayers.
- Dropped a lawsuit against a group of payday lenders accused of charging interest rates that amounted to as much as 950 percent a year, while dropping a different investigation in which a South Carolina-based subprime lender was found by the news organization ProPublica to be charging rates that could top 200 percent.
Separately, the Justice Department under Trump has sided with critics of Cordray in appealing his order of the extra $103 million fine in the PHH kickback case. The Justice Department’s new position under Trump: The CFPB’s leadership structure is unconstitutional. If a majority on the U.S. Court of Appeals for the District of Columbia were to agree, it could mean agreement that Cordray lacked the power to act alone and levy the fine.
In an email to CFPB’s staff last week and an op-ed in the Wall Street Journal, Mulvaney left no doubts about his position. His language has softened since 2014, when as a congressman he called the CFPB “a joke” in a “sick, sad kind of way.” He maintained last week he has “no intention of shutting down the bureau.” But he said the bureau will not treat banks and businesses as automatically suspect.
“We will exercise, with humility and prudence, the almost unparalleled power given to us to faithfully enforce the law in furtherance of the mandate given to us by Congress,” Mulvaney wrote. “But we will go no further.” The days of “pushing the envelope” in pursuit of some “mission,” of being the “good guys” out to fight the “bad guys,” he said, “are over.”
How does Cordray see it?
Asked about the swift changes at the agency he headed until recently, Cordray sought to portray them as hardly unique. He cited actions by Trump’s education secretary, Betsy DeVos (favoring more school choice and vouchers), by EPA Administrator Scott Pruitt (cutting environmental regulations), and by Trump’s first health and human services secretary, Tom Price (paring back Affordable Care Act obligations).
Outsider observers, however, say the very thing that made it easy for Cordray to do as he or Democrats wished — his independence — have aided Mulvaney in suspending those very actions.
“This is certainly a very dramatic example of an agency changing course with a new head, and I definitely think that the unique structure of the CFPB facilitates that,” Jonathan Adler, a constitutional law professor at Case Western Reserve University, said in an email. “Unlike other ‘independent’ agencies, it’s headed by a single individual (as opposed to a multi-member commission). This makes it easier to get things done.”
Congressional Republicans would like to change the structure by requiring a commission that would have to approve the director’s actions, as occurs at other independent agencies. They have lacked the votes to do so, however.
For Democrats, that provides a glimmer of hope for the future. If a Democrat wins the presidency after Trump, Trump’s eventual CFPB nominee, post-Mulvaney, will see his or her term end after serving five years (unless like Cordray, he or she resigns early). A new, Democrat-appointed CFPB director could be named. Courts might restrict the bureau’s power before then, but if that fails, turnabout will be fair play.
“The job of the Consumer Financial Protection Bureau is to fight just as hard for American families as Wall Street lobbyists do for big banks — and believe me, those lobbyists don’t pull any punches, so neither can the CFPB,” said Sen. Sherrod Brown of Ohio, the top Democrat on the Senate Banking Committee and an unapologetic champion of keeping that mission going.
Cordray speaks of the CFPB’s future in philosophical tones, even though much of his work could wind up in the trash heap. He may look boyish — Politico magazine described him as “an awkward introvert who looks like the page Kenneth from 30 Rock” — but his verbal mannerisms are more like those of a history teacher with a quick mind and a vocabulary to match.
“There will be transitions in the bureau from time to time,” Cordray told Cleveland.com. “I firmly believe this bureau will last for hundreds of years, as long as this country lasts. And I think it will play an important role. And there will be times when it is more aggressive and times when it is more in retreat. Like certain other parts of the government, it will ebb and flow, and that’s certainly to be expected and nothing too surprising about that.”
But what about the bureau’s initial work — the work that bore Cordray’s stamp? That’s got to disappointing. How disappointing?
“I don’t have a spectrum on that,” Cordray said.
Then he added he won’t hesitate to speak out when he disagrees with what the bureau now does.
“I’m not going to stand by and ignore things that I think are important to talk about.”
