The Consumer Financial Protection Bureau had a difficult birth. Written into the Dodd-Frank reforms in the aftermath of the 2008 financial collapse, the CFPB was created to protect consumers from payday lenders, credit-card companies, student-loan sharks, and debt collectors.
That made the bureau a natural target of those industries. In 2012, lobbyists pushed Congress to eliminate the position of CFPB director in favor of a five-person board, and to put Congress, not the Treasury, in charge of its funding. They also tried to slow down the bureau’s formation, recalls Christopher Peterson, a former CFPB official who served as a special adviser to the bureau’s first permanent director, Richard Cordray. “Members of Congress would send letters demanding explanations,” Peterson says. “That doesn’t sound like that’s that big of a job, but it’s a lot easier to write a question [than to answer it]—especially if a lobbyist or an attorney for a financial institution is actually ghostwriting.”
The goal, ultimately, was to strip the CFPB of its independence. With the election of Donald Trump and the rapid implementation of his virulently anti-regulatory agenda, the lenders finally got their wish.
Last November, Cordray resigned to run for governor of Ohio (his directorship was slated to end in July 2018). Trump’s pick to replace him was former House member Mick Mulvaney (R-SC), who also heads the Office of Management and Budget. Mulvaney immediately brought the bureau under the president’s direct political control, assigning appointees to shadow career staffers in each CFPB division, moving critical supervisory and enforcement functions into the director’s office, and requesting no money for bureau operations at all. In June, he fired his entire advisory board after several members criticized his leadership. He also changed the agency’s name to the Bureau of Consumer Financial Protection.
Among Mulvaney’s more radical moves has been to defang the CFPB’s oversight of student loans. American students are deeply in debt: 44 million people owe a combined $1.5 trillion. Eight million are now in default, while 3 million more are at least two payments behind; three times as many people defaulted on student debt in 2016 than lost a home to foreclosure. That makes these borrowers susceptible to scams: Under Cordray, the bureau received 60,000 complaints through August 2017—that’s one complaint per hour, 24 hours a day, seven days a week. The CFPB acted on many of them, returning $750 million to injured borrowers, as well as conducting proactive supervision.