Concluding Thoughts

This chapter argues that the Consumer Financial Protection Bureau presents a model for how government can serve all Americans, helping remedy individual injustices and correct larger distortions in our market economy. Providing support to consumers—ranging from financial education to law enforcement to setting regulations that reform dysfunctional practices in the marketplace—contributes to individual well-being and strengthens families. As fully two-thirds of our economic output is consumer driven, shoring up consumers and imposing sensible regulations to curb excesses of corporate power make the economy sounder and more resilient. People are anxious about the future, and they feel the indignity of corporate indifference when their legitimate concerns are ignored or dismissed. If people lose faith in government’s ability to stand up to powerful special interests, their alienation threatens to destabilize a broad and empowered middle class. Promoting and safeguarding a marketplace that serves consumers—all Americans—is essential to our democracy.

A Great Big Country

Consumer problems are everywhere, but the issues differ dramatically across the United States: from lack of access to credit in the impoverished Mississippi Delta, to scammers in New York City, to rampant foreclosures in Phoenix, Las Vegas, and Tampa. Along with traveling the country to experience and understand issues in local communities, the Consumer Financial Protection Bureau broke down the immensity of serving 320 million Americans by focusing on specialty populations. This chapter describes this work: the bureau’s Office of Servicemember Affairs, which secured new protections for military personnel and their families; its Office of Students, which addressed student loan issues and improving choices about financing higher education; its Office for Older Americans, which sought to crack down on elder financial abuse and educate families dealing with late-life financial issues; and its Office of Financial Empowerment, which worked to reduce the shockingly high costs and risks of living in poverty.

The Last Big Fights

At the start of the Trump administration, the Consumer Financial Protection Bureau had three unfinished projects that represented years of work to protect consumers. First, the bureau had adopted a rule protecting consumers who increasingly use prepaid cards as a substitute for traditional bank accounts. Second, the bureau was finalizing a rule preventing financial companies from using arbitration clauses to strip consumers of their right to band together to sue a company in court. Third, the bureau was straining to finish its work on a rule reining in predatory payday loans that trap consumers in a ruinous and repeating cycle of high-cost borrowing. This chapter describes the urgent need for these rules and the fierce political battle that followed the bureau’s completion of each rule, with industry sometimes winning and sometimes losing its push to undo the rules.

Ways and Means

We expect people to shop for the best deal, know their limits, and make responsible decisions. But contracts for financial products and services have become incredibly complex, and people receive surprisingly little education in how to manage their money. This lack of know-how makes consumers easy targets, not only for predators, but also for legitimate businesses looking to maximize their profits. This chapter makes the case for providing personal finance education in schools and also in the workplace. It also describes the Consumer Financial Protection Bureau’s research on the gross mismatch between corporate spending to market financial products and general spending to improve financial literacy ($25 to $1), its efforts to help deliver financial education, and its ground-breaking work on defining and measuring the concept of financial well-being.

A Powerful Force for Good

Robust law enforcement is crucial to a fair market. Companies that lie, cheat, or steal take advantage of consumers and the honest companies that they compete against. Congress gave the Consumer Financial Protection Bureau two powerful tools to combat fraudulent, deceptive, and abusive practices by big banks and financial predators. One was the authority to bring public enforcement actions against corporate violators, and the other was to send supervisory teams into the companies themselves, to inspect and monitor how they treat consumers. This chapter tells how the bureau developed and combined these tools and then used them to put over $12 billion back in the pockets of consumers who had been wronged. It also discusses how the bureau used supervisory oversight and enforcement actions to prevent or halt systematic ongoing abuses such as deceptive marketing of credit card add-on products and discriminatory auto lending.

The Making of a Watchdog

The Consumer Financial Protection Bureau’s strategy was to push through the political opposition by acting aggressively for consumers. Early on, the bureau worked to make the terms of financial products more understandable for consumers, creating streamlined forms for mortgages, student loans, and credit cards. It took major enforcement actions against credit card companies for deceptive marketing, returning billions of dollars to consumers. As Cordray’s nomination languished in the Senate, President Obama made an extraordinary recess appointment to install him on a temporary basis. The financial industry immediately challenged the appointment in court, and Republicans pushed back hard in tough oversight hearings. In July 2013, the Democratic Senate majority leader, Harry Reid, moved to invoke the “nuclear option” to approve nominations by a simple majority vote. The Republicans yielded, and Cordray was confirmed in a bipartisan vote of sixty-six to thirty-four. In a tough two-year battle, the bureau prevailed over the strenuous opposition.

An Ominous Mismatch

Congress created the Consumer Financial Protection Bureau, sparking a bitter partisan battle. The bureau’s mission—to help individual consumers cope with their financial problems and to ward off future crises like the 2008 financial collapse—posed a direct challenge to the financial industry. As the industry has grown, it has also greatly expanded its power in Washington through extensive political contributions and lobbying efforts. Its support for the Tea Party movement shifted the political balance in the 2010 elections. Using its political might, the industry opposed the bureau and then sought to block confirmation of anyone as its director, hoping to hobble efforts to operationalize it. On Elizabeth Warren’s recommendation, President Obama nominated Richard Cordray to be the first director, starting a fight over his confirmation that would last two years.

A Treacherous Transition

In November 2017, Cordray announced that he was stepping down. President Trump refused to recognize the Consumer Financial Protection Bureau’s deputy director as the interim leader, appointing one of his cabinet officers, Mick Mulvaney, to the post. Mulvaney, a sharp critic of the bureau, vowed a policy of inaction to slow the pace of enforcement and regulation. The chapter describes Mulvaney’s largely superficial efforts to undermine the bureau, his steps to roll back the payday lending rule, and his transfer of control a year later to the new confirmed director, Kathy Kraninger. It describes how the dynamics of federalism are helping protect consumers even in an era when the bureau has pulled back. And it discusses the bureau’s continuing work—including a further billion-dollar penalty against Wells Fargo for unfair and deceptive practices that greatly harmed consumers—and the importance of leadership in setting the bureau’s course.

Under Fire from All Sides

With the Wells Fargo case reaffirming the Consumer Financial Protection Bureau’s mission, its future seemed assured. But a few weeks later in October 2016, Judge (soon-to-be Justice) Kavanaugh wrote an opinion that leveled a direct blow to the bureau’s independence. His ruling for the court of appeals held that the Constitution requires the president to have the power to replace the bureau’s director anytime, for any reason. In November, Donald Trump was elected president. Inauguration Day was only two and a half months away, and the bureau would be under fire from all three branches of the government. With renewed calls from the financial industry for Cordray to be fired, the bureau was at a crossroads. This chapter chronicles the steps that the bureau and Cordray himself took to stave off and, if necessary, contest his firing.

The Rise of the Financial Consumer

Dramatic changes in our economy have magnified the importance of consumer financial issues. Consumer credit is now much more widely available than it was two generations ago, providing people greater opportunities. But its increasing complexity exposes people to new hazards. And the ripple effects of mistakes made by lenders and consumers transcend the individual, posing risks to the broader economy. In 2008, Wall Street’s reckless investments caused the mortgage-market meltdown and brought on the financial crisis. Millions of people—including many who were not involved with any of the bad lending—lost their jobs, their homes, and their retirement savings. Some communities have not yet recovered, worsening inequality and feelings of alienation. This chapter discusses how these broader consequences called for a new government agency to protect not only consumers and their families but also the economy as a whole.