Yesterday, Consumer Financial Protection Bureau Director Richard Cordray released a letter to President Donald Trump in which Cordray urged the president to veto Congress’ resolution overturning the CFPB’s anti-arbitration rule. Competitive Enterprise Institute senior fellow John Berlau responds with his own letter to President Trump, urging him to sign the resolution—and to fire Cordray.
Dear Mr. President,
As I’m sure you know, since a White House statement says you “applaud” the action, the U.S. Senate voted last week to overturn the Consumer Financial Protection Bureau’s horrific regulation that would have greatly restricted arbitration clauses in credit contracts and effectively forced consumers into class action lawsuits. Now the resolution, passed by both houses of Congress pursuant to the Congressional Review Act, is on your desk. CFPB director Richard Cordray has sent you a letter making a “personal appeal” for you to veto the resolution and let this regulation go through.
The letter from Mr. Cordray, who has attacked your financial regulatory appointees who bravely countered the CFPB on the anti-arbitration rule, has inspired me to write my own “personal appeal” to you. I ask that you sign the resolution overturning the regulation, which I know that you’ll do. And I have one additional request.
President Trump, please fire Director Cordray immediately. Community banks, credit unions, and most important, American consumers should not be subject to his stifling red tape nor his abuse of process for one more day!
Without a trace of irony, Mr. Cordray writes that without the rule, American families will be “left helpless to fight back.” You know this is not the case, as your White House statement points out correctly that the regulation “would neither protect consumers nor serve the public interest,” and that “by repealing this rule, Congress is standing up for everyday consumers and community banks and credit unions.” Indeed, despite fake news stories proclaiming Wall Street the only winner from defeat of this regulation, representatives of community banks and credit unions, such as the Independent Community Bankers of America and the Credit Union National Association, opposed the rule vigorously and urged Congress to kill it.
But where community banks, credit unions, and consumers are really left helpless to fight back is against the CFPB that is strangling them with red tape. The CFPB was designed deliberately by the Democrat-controlled Congress that rammed through Dodd-Frank to be unaccountable to both Congress and the president. Congress has no control over the CFPB’s budget, which is taken from the revenue of the Federal Reserve. Similar to a department in your Cabinet, the CFPB has a single director. Yet Dodd-Frank says that unlike a department in your cabinet, the president can’t remove the director—who serves a five-year term—except for “inefficiency, neglect of duty or malfeasance in office.”
In October 2016, the United States Court of Appeals for the District of Columbia ruled that these restrictions on firing the single head of a government agency are unconstitutional, and that the president has the constitutional power to fire the CFPB director “at will,” in the same way he can remove a cabinet secretary without cause. The ruling in that case, PHH Corporation, et al. v. Consumer Financial Protection Bureau, has been vacated because the full appeals court is now considering the case.
Sens. Mike Lee (R-UT) and Ben Sasse (R-NE)—who, as you know, have disagreed with you on issues in the past—argue that despite this appeal, you have the constitutional authority to fire Mr. Cordray until a court says otherwise. And they have urged you to fire Mr. Cordray, as have Sen. Tom Cotton (R-AR) and your former campaign manager Corey Lewandowski. Firing Mr. Cordray would unite the GOP in Congress just as overturning the anti-arbitration rule did.
And members of both parties have expressed concern about the harmful effects of the multitude of CFPB regulations on community banks and credit unions. A letter to Mr. Cordray from the Credit Union National Association and several state credit union associations called the CFPB’s regulatory approach “terribly troubling” and “baffling,” and noted that the cost of the regulatory burden on credit unions has increased from $4 billion in 2010 to $7 billion in 2014, due largely to CFPB red tape.
There is also cause for you to fire Mr. Cordray even under Dodd-Frank’s stringent conditions of “inefficiency, neglect of duty or malfeasance in office.” As I recently documented in Forbes, Mr. Cordray has “violated the due process right of the firms and individuals he regulates, approved excessive spending on renovations for the CFPB’s office building, and ignored Congressional subpoenas for information on the CFPB’s operations.” In the PHH case, his CFPB reversed a longstanding interpretation of federal law governing real estate transactions and attempted to sanction the firm retroactively for allegedly violating the law. Although PHH was big enough to challenge this action in court—where the outcome is still uncertain—smaller financial firms could be steamrolled by these types of actions.
The Senate gave Americans needed relief in overturning the CFPB’s anti-arbitration regulation., and I know you will sign this measure of relief into law. But the CFPB will still be an anvil on the American economy as long as Mr. Cordray is running it and as long as it is structured to be unaccountable. In the nine months left on Mr. Cordray’s official term that ends in July 2018, his CFPB can do much more damage to community banks and credit unions, and Congress likely will not be able stop all of the bad actions done.
To free Americans from the CFPB’s stifling red tape, you must fire Mr. Cordray now, and work with Congress make the CFPB accountable to the American people’s elected representatives. Thank you for your consideration