It’s a New Day for the CFPB
What a difference a day — or a couple of months — makes! The Consumer Financial Protection Bureau issued its five-year strategic plan in February, and boy does it paint a picture of a kinder, gentler CFPB. Well, maybe neither kind nor gentle, but I’ll settle for an agency interested in all of its stakeholders.
That seems to be the direction the CFPB is headed. In his prefatory statement, Acting Director Mick Mulvaney summarized the CFPB’s strategic shift like this:
“[W]e have committed to fulfill the bureau’s statutory responsibilities, but go no further. Indeed, this should be an ironclad promise for any federal agency; pushing the envelope in pursuit of other objectives ignores the will of the American people, as established in law by their representatives in Congress and the White House. Pushing the envelope also risks trampling upon the liberties of our citizens, or interfering with the sovereignty or autonomy of the states or Indian tribes. I have resolved that this will not happen at the bureau.”
The plan provides for a new mission statement …
“To regulate the offering and provision of consumer financial products or services under the federal consumer financial laws and to educate and empower consumers to make better informed financial decisions.”
… and a new vision:
“Free, innovative, competitive, and transparent consumer finance markets where the rights of all parties are protected by the rule of law and where consumers are free to choose the products and services that best fit their individual needs.”
The plan also lays out the three strategic goals the CFPB will aspire to in fulfilling its mission and vision:
- Ensure that all consumers have access to markets for consumer financial products and services.
- Implement and enforce the law consistently to ensure that markets for consumer financial products and services are fair, transparent, and competitive.
- Foster operational excellence through efficient and effective processes, governance, and security of resources and information.
Goal 1 protects consumers’ rights to choose the financial products or services that are right for them, and it impedes the CFPB’s ability to choose which products and services will be winners and which will be losers. Consumer advocates may fear that financial institutions may race to create products and services designed to drain consumers’ wallets, but the reality is that the vast majority of institutions do not operate with an intention to treat customers badly. Yes, there are some bad players as well as some good players that do bad things, but most try hard to engage in good business practices, build customer trust, and build the business with repeat customers and referrals. Financial institutions that aren’t playing the long game are doomed to fail.
Goal 1 also speaks to consumer education. I have long believed that we are, as a society, generally poorly informed when it comes to financial literacy. We are all better when we understand at least the basics. Yet, what the CFPB has done with respect to providing consumers with tools and knowledge for improving their ability to understand and evaluate the effectiveness of different financial products and services, pales in comparison to the heavy hand Mulvaney’s predecessor chose to wield in enforcement. I think most people, once they understand the fundamentals of today’s financial transactions, can comprehend the value a particular product or service may or may not have for them.
Goal 2 speaks to fairness and transparency, and the CFPB’s goal of promoting practices “that benefit consumers, responsible providers, and the economy as a whole.” The old CFPB was certainly looking to benefit consumers, but seemed to care little whether providers were getting a fair shake. In order for the economy to work, you need providers and purchasers. Pounding down providers limits the opportunities for purchasers and ultimately slows economic growth. Goal 2 assures us that the CFPB will continue to take its role seriously, but that all parties will have a seat at the table.
Goal 3 is inward-looking. The CFPB plans to take a good look at itself with an eye toward operating more “efficiently, effectively, and transparently.” To that end, it needs a high quality, diverse, inclusive, and engaged staff, and must adopt top-rate practices to identify recruit, develop, and train its employees. As someone who experienced the process of training some enforcement staff on how the laws they are charged with enforcing actually operate, I applaud this goal. Further, this goal requires the CFPB to better safeguard information it holds and the systems it uses, as well as expect accountability from staff.
What the plan says to me is that the CFPB is reinventing itself as a regulator with enforcement powers as opposed to an enforcement agency that regulates through its actions. This is good news for consumers and industry alike, as it will open up credit access and opportunity for all Americans, and give providers the certainty they need with respect to where the lines are drawn. Now, let’s see if the CFPB can really make it happen.
Michael Benoit is a partner in the Washington, D.C. office of Hudson Cook LLP. He is a frequent speaker and writer on a variety of consumer credit topics. Michael can be reached at 202-327-9705 or mbenoit@hudco.com. Nothing in this article is legal advice and should not be taken as such. Please address all legal questions to your counsel.
