The Trump administration revamped the Consumer Financial Protection Bureau, which Sen. Elizabeth Warren, D-Mass., championed in the aftermath of the 2008 financial crisis, to ease oversight of high-interest lenders.
The move has reaped rewards for companies like World Acceptance Corp., but consumer advocacy groups worry that high-interest lenders prey upon low-income workers with shaky credit histories, The Wall Street Journal reported.
President Donald Trump named former congressman Mick Mulvaney as acting director of the CFPB, which some Republicans have accused of being too harsh on lenders. Mulvaney also is director at the Office of Management and Budget.
Since taking charge in November, Mulvaney started reining in rule making and enforcement. Mulvaney is also scrutinizing the agency’s Obama-era effort to introduce the first federal regulation on payday lenders, according to the WSJ.
Sen. Warren and others protested Mulvaney's presence at the CFPB, whose outgoing director made his own pick for acting director.
"I'm here today because I believe. I believe that no one should get cheated on credit cards, or mortgages, or student loans," Warren said in November.
The CFSB called off its four-year investigation into World Acceptance, a South Carolina-based lender that targets subprime borrowers with short-term, small-dollar loans carrying annual interest rates of as much as 100 percent.
Consumer advocates say World Acceptance preys on customers with poor credit by pressuring them to refinance loans repeatedly and to buy unnecessary credit insurance.
The lender’s stock has nearly tripled since Trump won the election in November 2016. High-interest lenders Enova International Inc. and EZCorp Inc. also have jumped.
“The days of aggressively ‘pushing the envelope’ are over,” Mulvaney wrote in a Jan. 23 Wall Street Journal opinion column. “I intend to execute the statutory mandate of the bureau to protect consumers. But we will no longer go beyond that mandate.”
A Democrat-controlled Congress created the CFPB in 2010 after the housing crisis left millions of borrowers in default or underwater on their mortgages. Lawmakers gave the agency’s officials independent authority to use novel legal interpretations and tactics to oversee the financial-services industry, according to the WSJ.
Republicans also have taken aim at the agency’s management structure, which placed a lot of power in the hands of a single director. Other agencies like the Federal Trade Commission and the Securities and Exchange Commission have a chairman and commissioners. A federal appeals court on Wednesday ruled that the CFPB’s structure was constitutional.
"Sen. Elizabeth Warren was the intellectual godmother of the CFPB, established in the Dodd-Frank legislation of 2010," Peter Ferrara, a senior fellow at the Heartland Institute and a senior policy adviser at the National Tax Limitation Foundation, wrote in an op-ed for Investor's Business Daily. "She carefully designed it so that it constitutes a thorough violation of the Constitution's separation of powers doctrine, not answerable to the president, the Congress, or even another so-called independent agency."
Mulvaney reworded CFPB's mission statement to address “outdated, unnecessary, or unduly burdensome regulations.” He also said the CFPB would tap its monetary reserves instead of seeking more funding for the current quarter.
The agency’s enforcement work will focus on areas where it receives the most consumer complaints, such as debt collection, Mulvaney said.
“What it says is consumers are on their own,” Makada Henry-Nickie, a fellow in governance studies at the Brookings Institution and a former CFPB policy analyst, told the WSJ. “He laid out a really clear case here for why he should be protecting financial institutions, as opposed to the bureau’s mission to protect the well-being of consumers and to make the markets work for them.”
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