As American Banker reported, reactions to the ‘Mulvaney memo’ range from elation to disgust. Catherine Rampell of the Washington Post, for example, wrote that Mulvaney is “dismantling” the CFPB, while Sen. Elizabeth Warren (D-MA)—the intellectual founder of the Bureau—said that he is “trying hard to make the consumer agency work for the people who want to cheat consumers.”
Hyperbole aside, there is nothing that Mulvaney has said or done as head of the CFPB to suggest that he is intent on killing the agency. In his own words, Mulvaney made clear that he has “no intention of shutting down the bureau” and that the “law mandates that we enforce consumer-protection laws, and we will continue to do so under my watch.”
It is also no small issue that Mulvaney has no legal authority whatsoever to change the underlying structure of the Bureau or its statutory obligations. That would require new legislation from Congress. To say that he is somehow doing otherwise is sorely mistaken.
Quite simply, Mulvaney has outlined that the CFPB will no longer “push the envelope,” in that the Bureau will faithfully enforce the consumer protection laws as written, but not go beyond that mandate.
Maintaining that the Bureau follow its’ statutory mandate and not unlawfully or over-zealously regulate entities is not “dismantling.” It is abiding by the law. The CFPB should not be pushing the boundaries to regulate entities it has no jurisdiction over in the same way as the Department of Justice should not be pushing the boundaries to prosecute crimes it has no jurisdiction over. And if the Bureau looks to regulate entities, it should be done through a rulemaking—not enforcement. The concept is rather simple: Tell people that something is illegal, and then punish them if they do it anyway, rather than the reverse.
Even so, rather than “dismantling” the Bureau, Acting Director Mulvaney may very well be saving it. The CFPB is simultaneously one of the most powerful and unaccountable regulatory bodies in U.S. history. The structure of the Bureau resembles one of the notorious 1970s command-and-control agencies, while its’ culture is strongly and purposefully biased towards progressive causes, with a vision of consumer protection that revolves around prohibiting certain products and features instead of promoting competition, innovation, and choice.
Agencies of a similar culture and structure as the CFPB have been abolished in the past for the very same kind of bureaucratic tunnel vision that the CFPB exhibits. The Interstate Commerce Commission and the Civil Aeronautics Board are prime examples. Both agencies were designed to be highly independent, just like the CFPB, and both were abolished due to their narrow bureaucratic mindsets—creating conflicting and counterproductive policies without regard for other sectors of the economy.
The Bureau exhibits these same tendencies by “pushing the envelope” to regulate entities that are out of its jurisdiction, bringing dubious enforcement actions against businesses, and crafting one-size-fits-all regulations that prohibit financial services to low-income consumers. Just take the past couple of weeks as an example. Mulvaney was able to request a grand total of $0 in order to fund the Bureau, because the CFPB already had $177 million on hand, enough to cover its $145 million second-quarter budget. There is no good reason why a federal agency should have such a large reserve of funds for no specific reason. Further, a federal judge last week soundly rejected the CFPB’s overreaching punishment of an online lender, CashCall. The Bureau initially sought $235.6 million in restitution for consumers and $51.6 million in statutory penalties from the lender, but lacked evidence to justify the amount. Instead, the judge ruled that CashCall was subject to the lowest-tier penalty, amounting to $10.3 million.
Effective consumer protection does not require a body as unaccountable, powerful, and ideologically driven as the CFPB. In short, it does not require “pushing the envelope.” Reforming the operations of the CFPB to better align with its statutory requirements will “soften the edges” of the Bureau, making it less narrow-minded, aggressive, and controversial. Without reform, however, it is likely that the Bureau will someday meet the same fate as the other agencies and be abolished for its over-zealous and narrow mindset. Indeed, there have already been numerous bills introduced into Congress to abolish or significantly reform the Bureau.
Mulvaney may not be able to change the underlying structure of the Bureau—that is a task for Congress—but his reform will create a more fair and informed agency. Ironically, this may actually save the CFPB in the future.