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Inside Job: The Assault on the Structure of the Consumer Financial Protection Bureau

By Patricia A. McCoy. Full text .

Soon after the 2016 election of Donald Trump as President of the United States, while Republicans controlled Congress, opponents of the fledgling Consumer Financial Protection Bureau (CFPB) opened a campaign against the Bureau. Their target was less the substance of federal consumer financial protection laws than the structure of the CFPB itself. This emphasis on structure was a response to the fact that Congress in 2010 had given special thought to the design of the CFPB to safeguard the Bureau and its mission.

In 2017, after legislation to weaken the Bureau’s structure failed in Congress and constitutional challenges to the CFPB’s structure became bogged down in the courts, the leadership turned to the White House to dismantle the CFPB from within. Following President Trump’s appointment of Mick Mulvaney, the Director of the Office of Management and Budget, as CFPB Acting Director, Mr. Mulvaney executed on the strategy by halting implementation of CFPB rules, suspending parts of supervision, and drastically slowing enforcement.

This inside strategy to immobilize the CFPB’s operations will severely harm consumers in the short term. But longer term, the structure of the CFPB will likely survive and so will federal consumer financial protection, subject to three caveats. First, this analysis assumes that the pending constitutional litigation will not succeed in a way that cripples the Bureau. Second, it assumes that mortgage regulation will remain strong enough to avoid a repeat of the mortgage crisis, resulting in devastating long-term damage. Finally, it assumes that the CFPB’s leadership under President Trump does not subvert the laws establishing the architecture of the CFPB sufficiently to undermine that structure.