Consumer Advocates Can’t Wait for Biden

Consumer advocates are champing at the bit to get their hands on the CFPB.

Just weeks after Joe Biden was declared the victor of the 2020 presidential race – and in some cases even before that – advocates began releasing lists of policies they want reversed when the Biden Administration takes control of an agency they believe has been far too friendly with the businesses it is supposed to regulate.

“President Trump has made it clear from the beginning that he does not believe in protecting financial consumers and that the CFPB should be neutered,” one of those groups, Better Markets, said in a report issued before Election Day.

The group went on to say, “The CFPB requires new leadership and a complete reorientation back to the reason it was created: Protecting consumers.”

From payday lending to dismantling the agency’s controversial consumer financial law task force, groups are calling for changes that could affect the regulatory regime for credit unions.

There’s little question that President Trump slowed the regulatory pipeline for rulemaking at the CFPB, an agency that was created during the Obama Administration. Then-Director Richard Cordray began issuing rules and taking enforcement actions intended to help consumers.

But critics said Cordray was heavy-handed.

Credit union trade groups called on the CFPB to use the power it had to exempt certain types of institutions, such as credit unions, from CFPB rules. And they called on the agency to give the NCUA supervisory power over the largest credit unions. Dodd-Frank gave the CFPB that power.

However, the CFPB never made those changes and CUNA lobbyists said the agency is not likely to institute them in a reinvigorated CFPB in the Biden Administration.

The incoming administration has telegraphed its intention to reinstitute the strict regulatory regime established by Cordray by appointing an agency transition team that supported that agenda. For instance, Leandra English, who served as Cordray’s deputy director, is heading the CFPB transition team.

William Bynum, CEO of the $352.3 million Hope Credit Union in Jackson, Miss., who supported Cordray’s regulation of payday loans, also is serving on the team.

Reinstituting that regulation topped the list of several groups that want tighter financial regulations. The Cordray rule, among other things, contained an underwriting requirement that a borrower demonstrated an ability to repay a loan before it is approved.

Bynum endorsed that rule.

“With today’s payday lending rule, the Consumer Financial Protection Bureau has taken the bold and necessary action to safeguard the earnings of hard working individuals from the abuses of high-cost, small-dollar loans,” Bynum said when the Cordray rule was released. “The rule’s requirement to determine a borrower’s ability to repay will stop the debt trap and save consumers millions of dollars in predatory fees. For people living in the Deep South, the rule represents a major victory for consumers where state protections far too often fall well too short.”

Trump loosened that rule and eliminated the requirement that borrowers demonstrate an ability to repay a loan before it is disbursed. It also exempted one iteration of a loan patterned after the NCUA’s Payday Alternative Loan model, but did not exempt a second PAL model, future iterations of the loan model or other payday loans offered by credit unions.

In placing a high priority on reinstituting Cordray’s rule, groups said the regulation helped regulate predatory lenders.

“The Payday Rule’s mandatory underwriting provisions were widely supported as they prevented predatory lenders from trapping consumers in debt,” one group, Accountable.US, said in releasing a list of regulatory actions it wants the CFPB to tackle.

Another group has sued the CFPB in an attempt to reinstitute the Cordray payday rule. The National Association for Latino Community Asset Builders filed suit in federal court earlier this year, arguing that the Trump rule was adopted in an illegal rulemaking process and the Dodd-Frank Act.

Consumer groups also have their eyes on the Trump Administration’s debt collection rule. The rule has prohibited debt collectors from making a collection phone call for a particular debt more than seven times within a seven-day period or within seven days of having a telephone conversation with the debtor. It states that a consumer may restrict the type of media used by a debt collector to contact a person, and allows newer communication technologies, such as emails and text messages, to be used in debt collection.

The rule has only applied to third-party debt collectors; while credit unions are not third-party collectors, they do hire companies that are.

“The CFPB’s Debt Collection rule allows debt collectors to harass consumers,” Accountable.US said in listing the rule as one of the top regulatory actions it wants “an incoming administration to address.”

“The Biden Administration should direct the CFPB under new leadership to immediately begin working on a new debt collection rule mandating stringent prohibitions on excessive electronic communications, including limiting the number of texts and emails that can be sent to consumers,” the group said.

Better Markets agreed, saying that the CFPB’s debt collection regulations “give debt collectors far too much leeway to continue engaging in abusive tactics.”

And the advocates have taken aim at a task force that CFPB Director Kathleen Kraninger created to explore the entire spectrum of consumer finance law. Critics have said that she loaded the task force with anti-regulatory advocates and have called for its abolishment or reorganization. The National Association of Consumer Advocates and United States Public Interest Research Group has gone so far as to file suit against the agency, contending that Kraninger did not follow federal laws governing the organization of such groups.

On the other hand, conservatives are warning the Biden Administration to tread lightly.

“While deregulation goes against the DNA of many Democrat politicians, the reality is that the regulatory process has been corrupted for decades, and a centrist or center-left agenda is entirely consistent with wanting to repair the errors of previous administrations,” Omar Al-Ubaydli, a senior affiliated scholar at the Mercatus Center at George Mason University, said. “One way of reaching out to disgruntled Trump supporters, both at the grassroots and governmental levels, would be to acknowledge that Trump’s desire to deregulate was commendable.

And in a new report, the Congressional Research Service warned that if the past is any indication, the Trump Administration may not be finished with its rulemaking. Biden does not take office until Jan. 20, 2021.

“During the final months of recent administrations, federal agencies often have increased the pace of their regulatory activities,” the CRS warned, adding that “this phenomenon is often referred to as midnight rulemaking.”

In the report, the CRS said that because it can be difficult to change or eliminate rules that have been finalized, an outgoing president can ensure a legacy by issuing rules at the last minute.

If a rule has been finalized, an incoming administration would have to go through a new rulemaking process, including soliciting public comment on changes it wants to make. If a rule has not been finalized, it is much easier to derail a regulation.

In addition, Congress may pass legislation to revoke a rule or, under certain circumstances, use a federal law known as the Congressional Review Act to overturn a rule.