Swift changes to the CFPB Trump-era rules mean the agency has re-grown its teeth

 

 

Treading Water

Created during the Obama Administration as a response to predatory home lending and other consumer-damaging practices that resulted in the Great Recession, the Consumer Financial Protection Bureau (CFPB) had put lofty goals in place in response to both the Dodd-Frank Act of 2010 and the staunch advocacy of people like Senator Elizabeth Warren.

The many rules enacted by the CFPB were designed to actually hold banks and other financial institutions and lobbyists accountable to avoid another global economic disaster that resulted from reckless and predatory practices leading up to the 2008 financial collapse. Prior to Trump’s election, CFPB Director Cordroy oversaw the fledgling government agency designed to educate and protect average American consumers, as well as locate and prosecute bad actors that preyed on unwitting Americans in a variety of shameless ways.

One of the biggest fines doled out in the early CFPB years was a $100 million punishment against Wells Fargo for secretly opening accounts for customers without their consent. Another big accomplishment was creating rules that they then began to enforce against for-profit colleges that had shut their doors and left tens of thousands of students with debt and unable to complete a degree.

However, despite the many rules and regulations created during the Obama years in an effort to stabilize the country’s economy after its devastating collapse, a mere six years after the CFPB’s creation, Trump was elected, Republicans won the majority in the House and Senate, and the agency began to be almost immediately dismantled and attacked.

Though there were several CFPB Directors during the Trump years, the one who had the most impact was Mick Mulvaney, who basically stated in his infamous Washington Post Op-Ed in 2018, that the agency had little intention to bring complaints, investigations, and fines to companies who were purposely (or even unintentionally) harming American consumers. “It’s fair to say,” Mulvaney wrote, “that the bureau’s previous governing philosophy was to ‘push the envelope’ aggressively, under the assumption that we were the good guys and the financial-service industry was the bad guys…That is going to be different. That entire governing philosophy of pushing the envelope frightens me a little. We are government employees, and we work for the people.”

Citing his concern for potentially harming the “good people” of the companies the CFPB would no longer wish to bring Civil Investigations against, Mulvaney, in no uncertain terms, gave the vast majority of predatory financial companies a free pass. The result was that predatory lending and unfair consumer practices went promptly back to the pre-Dodd-Frank days. It was a dark time for the agency, but, like so many other important issues during those years, the neutering of the CFPB went largely unnoticed because of the constant fires being lit by the man in the White House.

 

A New Era Begins

With Joseph R. Biden’s election in 2020, a collective groan went through the financial industry as they realized the days of the “free pass” were coming to an end. Despite the many months of drama and obstruction culminating in the Capital Insurrection on January 6, 2021, the Biden team hit the ground running and immediately removed former Director Kathy Kraninger, installing current Acting Director Dave Uejio. Biden’s pick for full-time Director, Rohit Chopra, awaits senate confirmation despite having been nominated back in January of 2021.

Almost immediately, the focus of the Biden CFPB became abundantly clear. They were going to take on four key areas: student loan debt, payday lending, subprime auto loans, and Trump-era deregulation of mortgage lenders. But first, the new administration had to take on the massive economic and health crises inherited by the previous administration’s “handling” of the COVID-19 pandemic. The implementation of the 2020 CARES Act, which was still being meted out in a piecemeal manner throughout the country, was deemed to be the absolute priority. Alongside the CARES Act, Biden pushed another relief bill, the American Rescue Plan Act of 2021, which sought to further assist ailing and desperate Americans and businesses still reeling from a pandemic barely under control.

Soon, however, as Americans gained unfettered access to vaccines against the coronavirus and businesses began to open back up, the CFPB’s focus became laser sharp on the four issues they had signaled were the top priorities of the agency’s new leadership, as well as rescinding Trump-era rules that were antithetical to the stated purpose of the CFPB.

Beginning with the student loan debts of for-profit college victims, in June, Biden—in tandem with the Department of Education and advocacy from the CFPB—took the unprecedented step of cancelling over $500 million of student loan debt. This was a long-awaited response to the years-earlier CFPB-led investigation that found many for-profit colleges (like ITT Tech) had knowingly and purposefully manipulated their students and left them high and dry. Despite the findings coming during the Obama years, nothing was done about it during Trump’s tenure in the White House.

Now, the students who had desperately begged for loan forgiveness because of these colleges’ closures have been given the much-needed relief. But, despite the forgiveness of student loans, the CFPB has doubled-down on its oversight of for-profit colleges to ensure the same thing doesn’t happen to future generations of students.

However, another elephant in the CFPB room was the previous administration’s own rescinding and replacement of a rule designed to protect consumers from the blatant predatory and destructive nature of the payday lending industry. The previous 2017 rule meant that payday lenders were required to analyze potential customers’ “ability to repay” the loan they were about to be offered, which would have meant that the practice or rolling over payday loans in perpetuity would have been virtually squashed.

Though the current CFPB has not entirely reversed the decision handed down during the Trump years, it is well known that Biden director nominee Chopra intends to reestablish the previous rule and create far more rules to protect poor and minority Americans who are disproportionately the victims of predatory lending, such as payday loans.

Subprime auto loan practices are another key area the CFPB intends to aggressively address with new oversight rules and regulations. And they intend to get to it quickly. The reason? One of the surprising outcomes of the pandemic-related economy has been an explosion in subprime auto loans for used cars as Americans had to tighten their purse strings and brace for the financial uncertainty of the COVID economy. Of course, as is the case with most predatory lenders and unconscionable business practices, when a portion of the American population is faced with financial hardship, they swoop in to take advantage of the fear and desperation that accompanies it.

Due to the lack of supply for the overwhelming demand for vehicles stemming from the pandemic, “abusive acts and practices” often employed by this industry are currently being outlined and clearly defined in order to allow for enforcement against the types of practices featured in our previous blog posts on predatory lending that feeds off desperation and/or lack of knowledge. This is a key factor in helping the victims of this all-too-common form of predatory lending to gain a powerful advocate in the U.S. Government.

Last, but not least, the new CFPB intends to tackle some of the other harmful and dangerous deregulation that was rampant throughout the Trump Administration’s oversight: the home mortgage lending industry. The true hallmark of the previous administration was being unabashedly pro-business and anti-regulation. On nearly every oversight achieved by the Obama Administration, Trump and Congress overturned, vacated, or replaced the very laws and rules designed to rein in predatory lending and business practices.

Like the “ability to repay” aspect of the rule rescinded by the Trump Administration, the Seasoned Qualified Mortgage (or Seasoned QM) rule maintained that banks and mortgage lenders must do their due diligence before originating a home loan to prove to the government that the borrower could, in fact, realistically afford to repay the loan. Predatory banks and lenders, as expected, fought hard against this rule and were rewarded when Trump’s CFPB dismissed its most important aspect: requiring banks to prove their customers could truly afford the mortgage being originated by them.

Looking Forward From Here

It is an understatement to say that these steps by the CFPB, as well as the implementation of new rules being proposed, are a welcome relief for American consumers at a time when we desperately need it. After all, millions of Americans are still facing potential evictions and foreclosures because of the economic fallout of the pandemic. Luckily, our new initiative at AHP 75 is designed precisely for homeowners facing foreclosure during this trying time. Not only do we want to keep struggling homeowners in their homes, but we are also committed to our company’s core mission: to raise the homeownership rate to 75% for Americans of any race and economic status.

Through a suite of services made available by our ally companies, AHP 75 seeks to help consumers alleviate and remediate their debt, improve their credit scores, secure fair and equitable mortgages, and begin the process of generating wealth and financial stability. Visit our website and see how we can help put you on the path to homeownership—and keep you there.

Are you ready to become a homeowner? Visit AHP75.com to learn about our homebuyer programs designed specifically to help you join the ranks of homeowners and get onto the path of financial stability and wealth generation.


Aaron Morales is the Social Justice Writer for AHP 75, based out of Chicago, IL.

amorales@ahp75.com