The many reasons why the CFPB (Consumer Financial Bureau) Chief should be fired.

President Trump is famous for firing people, but he seems hesitant to pull the trigger on Richard Cordray Director of the Consumer Financial Protection Bureau (CFPB) even though a great case has been made for his dismissal from his own Treasury Department.

A report was issued 2 weeks ago with a recommendation on how to increase consumer choice, certainty as well as credit access in the financial system. Leading the cheers of the recommended changes to ease liquidity and capital standards are the big banks; however, the CFPB reforms might be of greater importance to more people.

A number of the recommendations to the Treasury will need legislation – like subjecting the agency to appropriations from Congress – but this same outcome can be achieved via the CFPB’s procedural and regulatory changes. This is where the problem is because Mr. Cordray isn’t willing to accept restrictions on his power.

Under Dodd-Frank, the President can fire the director only in cases of “inefficiency, neglect of duty, or malfeasance in office” as opposed to at-will like heads of other agencies. The report points out numerous ways that Mr. Cordray has ignored the law. The Treasury has pointed out that the CFPB has evaded notice-and-comment rulemaking and alternatively depended to an uncommon extent on enforcement measures and guidance documentation. According to the Administrative Procedure Act, agencies are required to provide proper rule-makings, or as a minimum formal direction, to explicate regulations.

According to Mr. Cordray, the bureau’s legal interpretations are guided by “facts and circumstances”. The CFPB has declined to offer guidance to Congress on conduct that could consist of “unfair, deceptive, or abusive acts and practices.” Their only guidance comes from enforcement actions. A compliance bulletin was published by the agency in 2012 for credit companies in association with a settlement with Capital One Financial Corp. of $210 million for suspected misleading marketing. Congress specifically exempted auto dealers under Dodd-Frank but the CFPD has targeted them. Discrimination was charged by the bureau, according to suspicious disparate-impact evaluation which assumed the victims’ ethnic group depending on their address and name.

Navient, a student loan provider, was accused of abusing borrowers by the CFPB in January. Navient is regulated by the Education Department and they placed borrowers in forbearance instead of loan forgiveness. The authority of the bureau was abused when they issued wide-ranging civil investigative demands, which were actually fishing expeditions, but they lacked legal subpoena protection and discovery motions for the parties being prosecuted. The document demands can be challenged by the target, however, the CFPB shamed supplicants by publishing their rejections and have never agreed to focus the scope publically. A civil investigative demand made to the Accrediting Council for Independent Colleges and Schools was halted by the D.C Circuit Court of Appeals in April.

The CFPB was slapped down by the court for extending its influence over a charitable organization that isn’t even tangentially associated with finance in addition to not offering an outline “of the conduct the CFPB is interested in investigating.” In an effort to try to avoid getting rebuked by the court, the CFPB tried using their own administrative law judges to oversee the cases, which happened on an expedited timeline and the lack of due process safeguards of the judiciary. In an amazing twist, the bureau stated that there is no statute of limitations for their enforcement actions and the D.C. Circuit said it was “absurd” last year. The Treasury argues that the constitutional system of the U.S. with its checks and balances was being undermined and that the CFPB’s “lack of clear regulatory standards may lead to excessive risk-aversion among regulated parties, thereby undermining innovation and consumer choice.”

The report suggests that the CFPB clearly outline what unfair, abusive and deceptive practices are and issue guidelines subject to general public opinion and notification. Treasury is also suggesting that the bureau minimizes its use of civil investigative demands and administrative law judges along with other self-restraint measures. July 2018 marks the end of Mr. Cordray’s term and it could take over a year to implement reform at the Treasury and attendant rule-making. Until then, Mr. Cordray can keep shaking down businesses using enforcement in an effort to bolster his impending Governor of Ohio campaign. Mr. Cordray might not care if he got fired or if he became the newest martyr for The Resistance.

So why not fire him right now?

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