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End CFPB's Collection of Americans' Financial Data

Last week, when the drama of the dueling directors began at the Consumer Financial Protection Bureau (CFPB), I told The Washington Examiner that the new director should “rein in or kill” the CFPB’s “NSA-like” database holding sensitive information from millions of consumers’ credit cards and mortgages. I am pleased that this week Acting Director Mick Mulvaney announced that no more consumer data will be collected until a thorough review is conducted of the security of this data.

Mulvaney was appointed by President Trump last week under the Federal Vacancies Reform Act to temporarily replace outgoing CFPB director Richard Cordray. But on the day of his departure, Cordray promoted his chief of staff, Leandra English, to deputy director. As described in an incisive new article in The Weekly Standard by former CPFB enforcement attorney-turned whistleblower Ronald Rubin, Cordray and English cited a Dodd-Frank provision to claim “his lateral pass to English made her the CFPB’s acting director before President Trump could use the Federal Vacancies Reform Act to appoint his own.”

While English is still fighting Mulvaney’s appointment in federal court (despite even liberal legal scholars proclaiming she doesn’t have a case), Mulvaney is taking action to benefit consumers by freezing pending rules that would limit their choices and raise costs for the financial products they use. And in halting the gathering of this data, Mulvaney has taken a first step in respecting the privacy rights of millions of Americans that had been trampled by the CFPB.

As former House Speaker Newt Gingrich wrote in The Wall Street Journal: “Every month the CFPB … gathers data on 22 million mortgages, 5.5 million student loans, two million bank accounts with overdraft fees, and hundreds of thousands of auto sales, credit scores and deposit advance loans.” My CEI colleague Iain Murray and I have been writing about the troublesome database and its threat to privacy since the CFPB created it more than four years ago.

The CFPB had claimed it needs this voluminous data to research consumer “patterns.” It also had dismissed data security concerns, saying the data is “anonymized.” In 2015, the Government Accountability Office criticized the CFPB because it had not “fully implemented a number of privacy control steps and information security practices.” This, the GAO concluded, “could hamper the agency’s ability to identify and monitor privacy risks and protect consumer financial data.”

Given the bipartisan criticism—which CEI joined—of the privacy violations of the National Security’s Agency data collection, one would think that the CFPB’s data overreach should also be troublesome to politicians regardless of party. A June 2015 poll by Zogby on behalf of the U.S. Consumer Coalition found that only 20 percent of Americans agree with the CFPB’s collection and review of credit card statements without consumers’ knowledge. Yet Democrats critical of the NSA have actually stayed silent or even defended the CFPB on this issue.

Sen. Elizabeth Warren (D-Mass.), for instance, told the Associated Press that Congress must “end the NSA’s dragnet surveillance of ordinary Americans.” Yet, why has she been silent on the CFPB’s “dragnet surveillance” of Americans’ mortgage and credit card records?

One crucial difference between the CFPB and NSA is that the NSA has mechanisms of accountability. The NSA gets its appropriations from Congress. By contrast, the CFPB get its funding not from Congress, but from the Federal Reserve—so the people’s elected representatives have no power of the purse to curb abuses like this massive database. This lack of accountability is why CEI, along with the 60 Plus Association and the tiny Texas State National Bank of Big Spring, Texas, continue our constitutional lawsuit against the CFPB’s unaccountable structure, which has resulted in so many harmful policies.

Mulvaney made a good first step in halting the dangerous data gathering. But we must remedy the CFPB’s constitutional defects to help ensure the bureau stops trampling on American consumers’ liberties for good.