What’s at stake with changes at consumer watchdog

Since the housing crisis and recession, consumers have been able to turn to the Consumer Financial Protection Bureau for help with problems with their financial institutions. That assurance could soon fade.

The CFPB is the federal government’s consumer watchdog agency for all things financial: checking accounts, credit cards, payday loans, debt collectors, etc. It exists to make sure customers are not being exploited and that banks are complying with the consumer protection laws on the books. Proponents of the agency say that before the crisis there was no one regulator to turn to when things got bad in the mortgage market.

The bureau was thrust into a leadership crisis last week when the CFPB’s outgoing director elevated Leandra English to interim director, while President Donald Trump chose his own person for the role — White House budget director Mick Mulvaney. A court ruled Tuesday in favor of the White House, declining to grant an emergency restraining order requested by English to stop Mulvaney from becoming acting director.

Mulvaney, and whoever becomes the permanent director, is almost certain to be friendlier to financial companies than previous director Richard Cordray. Trump says the CFPB under Cordray “devastated” the financial industry, although the nation’s commercial banks and savings institutions reported solid earnings growth for the third quarter.

While the CFPB bank examiners will stay put, what Trump’s CFPB leadership chooses to do with their findings is anoth-

er matter. They could choose to take a more relaxed approach to how banks operate, or even sweep aside issues that previously would have garnered attention from a director.

The CFPB currently runs a public, online website where consumers can submit complaints about their bank, credit card company or any other financial services company.

Banks dislike the public consumer complaint database, arguing that the complaints are no different from someone leaving a bad Yelp review online, and they are not vetted. The CFPB in the past has argued the public complaint portal is one way to hold banks accountable for wrongdoing.

An industry-friendly CFPB director could significantly curtail or close entirely the public side of the complaint database. The database itself cannot be entirely removed, since it’s required by law, just new complaints would likely be no longer public.

A big part of what the CFPB did under Cordray was to write new rules and regulations that impacted numerous aspects of the financial industry. Those rules and regulations are likely to be revisited now under a new director.

For example, the bureau finalized significant regulations on the payday lending industry earlier this year. If allowed to go into effect, payday lenders would be subject to significant restrictions on how they make loans and determine whether their loans can be repaid.

While Mulvaney or any Trump appointee could not rescind those rules entirely, they could delay the enforcement of the rules or even propose significant changes to the rules.