WASHINGTON ― Republicans don’t like the Consumer Financial Protection Bureau. They opposed the very idea of the watchdog when Elizabeth Warren first proposed its creation, and they have been trying to defang and defund it ever since Congress made her vision into a reality.
Republicans typically attack the CFPB for being good at its job. The agency has returned over $11 billion to a total of 25 million bilked consumers in its first five years, and every dollar that goes back to customers is a dollar that a financial firm doesn’t get to book as its own profit. Banks, payday lenders and other operators have spent a lot of money on lobbying and campaign contributions to stem this cash outflow. And Republicans have responded by crafting legislation to tie up the CFPB with red tape and made it harder to enforce its consumer protection rules. Both the House and Senate are currently pushing bills that analysts at the investment bank Keefe, Bruyette and Woods describe as “weakening” the agency.
The CFPB has enjoyed a run of good press after it slapped a $100 million fine on Wells Fargo for using customers’ personal information and money to sign them up for online banking services that the customers never asked for. Over at least the past five years, bank employees created more than 1.5 million sham checking accounts and applied for 565,000 credit cards. Many customers found out about the new accounts after they started accumulating fees.
But CFPB is still facing heat from Republicans ― ironically, this time, for not regulating Wells Fargo hard enough.
Wells Fargo CEO John Stumpf and CFPB Director Richard Cordray, among others, faced the Senate banking committee Tuesday morning. Sen. Richard Shelby (R-Ala.), the committee chairman, pressed the CFPB on why it didn’t go after Wells Fargo more quickly, noting that the Los Angeles Times first reported on the problems in December 2013 and the Los Angeles city attorney sued the bank in 2015.
“This timeline begs the question: Where were the federal regulators during those years?” Shelby asked.
“Why did it take an LA Times reporter to uncover what should have been uncovered by Wells Fargo’s regulators? If there were ever a textbook case where consumers needed protection, this was it,” the senator added. “How many millions of unauthorized accounts does it take before the CFPB notices?”
Sen. Bob Corker (R-Tenn.), another committee member, told The Huffington Post after the hearing that he was also concerned the Los Angeles Times was more on top of the issue than the CFPB was.
“From what I can tell, the consumer bureau had nothing to do with finding this. I know they came along to vacuum up a fine, if you will. But from what we understand, it was actually the LA Times reporter who uncovered this,” Corker said.
“Look, I think we should have consumer protection. I always have,” he added. “I was part of negotiating a bill that would certainly create a consumer protection bureau. I do think having a commission or board members would be a good check and a balance. But I have no indication here ― and again, I support their existence ― but I have no indication that they had anything whatsoever toward uncovering this.”
“In today’s Banking hearing, Wells Fargo CEO Stumpf admitted that he knew about the fraudulent sales practices back in 2013, but in fact, this was a problem back in 2011. This is a classic example of a ‘Too Big to Fail’ megabank being ‘Too Big to Manage’ and ‘Too Big to Regulate,’” Sen. David Vitter (R-La.) said in a statement to The Huffington Post. “If the federal regulators had been doing their job all along, we would have ended this scam several years ago.”
Vitter previously co-authored a bill with Sen. Sherrod Brown (D-Ohio) that would have broken up big banks.
Sen. Tim Scott (R-S.C.) said the Wells Fargo incident didn’t change his mind about the need to change CFPB.
“I have yet to see any proof that the CFPB would have prevented the mess we are seeing unravel at Wells Fargo,” Scott said in a statement. “It remains an unelected and non-transparent board that is only enlarging the bureaucracy.”
ER Anderson, spokesman for Sen. Pat Toomey (R-Pa.), also said the senator believes CFPB “was asleep at the switch.” He said Toomey believes Well Fargo employees’ actions were “outrageous and fraudulent,” and the guilty employees and negligent management “should be held accountable.”
“But let’s be clear,” Anderson added. “CFPB did not discover the wrongdoing by Wells Fargo. ... In fact Senator Toomey asked the CFPB, other federal regulators, the L.A. City Attorney, and even Wells Fargo about the CFPB’s involvement and none can provide any evidence that the CFPB discovered any wrong doing. Unlike the OCC and the L.A. City Attorney, the CFPB continues to refuse to provide evidence that it played any role in unearthing or cleaning up the mess other than collecting the $100 million fine from the bank ― not a penny of which the CFPB will give to the victims.”
Cordray said Tuesday, however, that the CFPB knew about the abuses before the Los Angeles Times, first learning about them from whistleblowers in mid-2013. Shelby pressed Cordray on the timeline of investigations, trying to get him to admit that the CFPB essentially glommed onto the work of the LA city attorney and the federal Office of the Comptroller of the Currency. Cordray replied that his agency was doing its own investigation all along:
SHELBY: Prior to filing the city lawsuit in May 2015, did CFPB personnel accompany [the Los Angeles city attorney’s] investigators as they did the following: conducted numerous interviews with former Wells Fargo employees, met with aggrieved victims, poured over public records including court records from wrongful termination lawsuits by Wells Fargo. Did they?
CORDRAY: These investigations merged over time what work we were doing, work the OCC was doing.
SHELBY: They initiated the investigation, did they not?
CORDRAY: They investigated ― they initiated their investigation. We initiated our own efforts. In our office.
SHELBY: After they ―
CORDRAY: No, we first heard about these problems in mid-2013 through whistleblower tips. The LA Times investigative series confirmed there were issues in this industry.
The other GOP senators on the banking committee did not return requests for comment.
Sen. Chuck Schumer (D-N.Y.) said during Tuesday’s hearing that the Wells Fargo revelations show that the agency has had a “very salutary influence” and is “a necessary part of our system of banking and governing.” And Democratic presidential nominee Hillary Clinton pledged to protect the CFPB in an open letter to Wells Fargo customers Tuesday.
This article has been updated to include comments from Sens. Scott and Toomey.