If you’ve been paying attention to the Consumer Financial Protection Bureau (CFPB) over the past few weeks, you may have noticed that the agency has been raking in millions of dollars in enforcement actions. Among its most recent actions are the following:
>> On June 5, the CFPB announced that Guarantee Mortgage Corp. would pay, according to a press statement, “a civil penalty of $228,000 for paying its branch managers based, in part, on the interest rates of the loans they closed.”
>> One day earlier, CFPB Director Richard Cordray issued his decision on the first-ever appeal of a CFPB administrative enforcement proceeding by demanding PHH Corp. pay $109 million as punishment for its alleged practice of referring consumers to mortgage insurers in exchange for kickbacks.
>> Also on June 4, the CFPB demanded that RPM Mortgage Inc. pay $18 million as punishment for supposed steering practices, while the company’s CEO got his own $1 million fine.
>> On May 28, the CFPB joined the U.S. Department of Justice is securing $9 million from Provident Funding Associates following charges that the company allegedly charged higher broker fees to nonwhite borrowers.
>> On May 19, the CFPB took a break from the mortgage industry to target the online payment service PayPal Inc., demanding $15 million “in consumer redress” and a $10 million “penalty” for supposedly signing up consumers for its online credit product Bill Me Later without bothering to get the permission of the consumers.
With a former state attorney general like Cordray in charge, none of this seems surprising. After all, he comes from the litigation world and the concept of fines and penalties is par for his course.
But what bothers me in going over the CFPB’s recent actions is the emphasis on “F” and the absence of “P” in CFPB – especially in regard mortgage lending. The avalanche of regulations that the CFPB has crashed on the industry has done the exact opposite of protecting current and potential homeowners. If anything, many of the problems that 2008-era homeowners faced with lenders and servicers had already disappeared by the time President Obama used an illegal recess appointment to shoehorn Cordray into this job, and the onerous regulatory regimen that the CFPB has mandated has actually made it more difficult for would-be homeowners to obtain credit.
All of the aforementioned fines may seem impressive, except that the CFPB is following the sorry lead that the other regulatory agencies have already staked out: a quick shakedown of very profitable firms with no requirement that an admission of guilt be made. Of course, there is also no serious threat of criminal action against the companies.
Indeed, RPM Mortgage issued a statement that bluntly noted that the settlement “did not allege that the way the company paid its employees actually harmed its customers in the form of higher interest rates or otherwise.” Furthermore, the company claimed it “chose to settle this matter without an admission of wrongdoing in order to avoid the cost and distraction of litigation.”
That is not, by any stretch of imagination, an example of protecting the consumers. If anything, the CPFB’s enforcements are being viewed as shakedowns by the industry – and statements like the one from RPM offer evidence that the agency is losing whatever respect it had.
Since it opened its doors, the CFPB has created a surplus of ill-will and a deficit of commendable results. Perhaps Cordray and his team need to step back and remember that their mission is one of consumer protection and not overzealous litigation. Getting wealthy companies to fork over shut-up money as a way of swatting aside lawsuits clearly shows this pesky agency seems more interested in filling its coffers than helping consumers.
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