As a group of Senate Banking Committee Democrats praised Richard Cordray’s work as of the Consumer Financial Protection Bureau, Republican members of the House Financial Services Committee think the CFPB director may have violated federal law that governs agency rulemaking procedures.
Lawmakers highlighted the report, based on internal CFPB documents obtained by the House committee, uncovers several potential legal problems with the bureau’s 2015 rule authorizing it to regulate the auto finance market.
One problem the House group says it found is Cordray’s “failure to heed” CFPB attorneys who advised him to publish a list of institutions the bureau believed would be subject to the proposed rule and to re-open the public comment period after it had closed.
Despite the recommendations of CFPB attorneys who warned him of the legal implications of failing to re-open the comment period, the report said Cordray approved issuing the final rule without disclosure and public comment on the data underlying the rulemaking.
Lawmakers added the report also demonstrates that under recent Supreme Court precedent, the CFPB’s use of the “disparate impact” legal theory in enforcement actions against auto financers would not survive judicial scrutiny.
“Fuzzy logic and false comparisons are unfortunately prevalent in the CFPB’s auto-lending actions,” according to the report that’s available here. “In every aspect of the CFPB’s auto-lending actions, the CFPB’s lack of rigor leads to unsupported and unreliable conclusions.”
This is the third investigative report released by committee Republicans during the last 14 months about the CFPB’s troubled efforts to regulate auto finance companies. All three reports relied on internal CFPB documents.
According to the first report, issued in November 2015, lawmakers said Cordray was aware the statistical method it used to allege racial discrimination in auto lending is “prone to significant error” and that bureau lawyers had warned him of the “weakness” of the disparate impact theory it relied upon to build discrimination cases against auto finance companies.
The second report, issued in January last year, disclosed that Cordray approved the distribution of $80 million in settlement proceeds from a discrimination case without verifying that the recipients were eligible to receive the money. Committee members insisted the result was that some white borrowers received settlement checks over alleged racial discrimination against African-Americans, Hispanics and Asians.
“Once again we see the CFPB is a dangerously out-of-control, unconstitutional and unaccountable bureaucracy. It is a case study in the overreach and pathologies of the regulatory state run amok. The bureau routinely abuses and exceeds its authority, robs consumers of their economic freedoms, increases consumer costs and often attempts to hide information from the public,” said Committee Chairman Jeb Hensarling, a Texas Republican.
Meanwhile, the Senate Democratic contingent emphasized the need for his leadership at the CFPB in President-elect Donald Trump’s administration.
In a letter to Cordray, whose term expires in July 2018, the senators highlighted his accomplishments at the bureau in protecting servicemembers, seniors, students, and Americans from what they described as “abusive financial products.”
Since opening its doors in 2011, the CFPB has returned nearly $12 billion to 29 million Americans “who have been cheated by shadowy debt collectors, for-profit schools, and payday lenders,” according to the agency.
“Under your leadership, the CFPB has worked to protect servicemembers, seniors, students, and working families of all backgrounds from predatory financial schemes and illegal discrimination,” the Senators wrote in the letter available here. “We hope you continue to lead the charge against companies that take advantage of hardworking Americans.”
The Senators noted that polling shows the vast majority of Americans agree that the CFPB is doing great work.
The lawmakers indicated 71 percent of Americans — reportedly both Republicans and Democrats — approve of the CFPB's mission, and 55 percent of Republicans who voted for President-Elect Trump believe that the CFPB should be left alone to continue its work or even be given expanded authority to do more.