Analysis: The NY Times’ Wobbly Defense of the CFPB

February 14, 2017
The Consumer Financial Protection Bureau (CFPB) has levied a $1.75 million civil penalty against Coppell, Texas-based Nationstar Mortgage LLC
At a time when it is increasingly difficult to separate news from #FakeNews, the New York Times presented a lavish praise of the Consumer Financial Protection Bureau (CFPB) that offered little evidence of objective observation. Even worse, it intentionally failed to state well-publicized facts concerning the CFPB while spinning a happy fantasy of a bureaucracy that always does the right thing.
 
Authored by Gretchen Morgenson, the Feb. 10 article “The Watchdog Protecting Consumers May Be Too Effective” immediately set its prejudices in its headline by insisting the new Trump Administration will be glad to see the agency disappear.
 
“Why would the president want to rein in the only federal agency dedicated to the consumer finance beat?” she asked. “Perhaps it has been a little too effective in pursuing wrongdoing by banks, consumer credit reporting companies, credit card issuers and student loan collectors.
 
While these activities have earned kudos from Main Street, the bureau has also made powerful enemies among financial institutions whose executives have the ear of Mr. Trump and other Republicans.”
 
Of course, Morgenson never provides any evidence that “Main Street” is even aware of the CFPB, let alone offering it “kudos.” Perhaps the Upper East Side social circle of the Times’ elite editorial board are pleased with the agency, but that’s hardly anyone’s definition of “Main Street.” And it might be a surprise to President Trump that financial institution executives have his ear, considering they didn’t have his back in the 2016 election: Wall Street’s money was on the other presidential candidate. In any event, White House Press Secretary Sean Spicer made it clear more than once that the CFPB’s fate is not an immediate priority of an administration that has yet to see its first-month anniversary.
 
Morgenson did not get anyone from the Trump Administration to speak on the record for her story. (This is something of a trend at the Times, where coverage of the administration is based almost exclusively on anonymous “people familiar with” the White House.) Instead, she offered Quyen Truong, a former assistant director and deputy general counsel at the CFPB and a partner at Stroock & Stroock & Lavan, to provide insight. However, Morgenson failed to acknowledge a major complaint about the CFPB: that many of its high-ranking officers waltzed out of the agency and into very-high-paying lobbying and law firm positions in Washington.
 
Morgenson then claimed, “Reducing the bureau’s power would deal a blow to consumers, because other federal finance regulators just don’t have their interests at heart.” It would seem that Morgenson never heard of the Federal Trade Commission, which actively investigates fraud aimed at consumers, or the Securities and Exchange Commission, which has the interests of individual investors within their mission. And there is the Department of Justice, too—not a “federal finance regulator,” obviously, but a federal entity that often aims at those abusing consumers.
 
Morgenson then highlighted what she dubbed “one of the CFPB’s best features:” The agency’s complain process. “This system is the largest database of consumer finance complaints in the country, bureau officials say,” according to Morgenson. “Monthly reports analyzing the grievances received by the bureau are available on its Web site, providing a real-time snapshot of problems consumers are experiencing in their financial lives. On the website, consumers can also describe their experience with a financial company. So far, more than 130,000 of these narratives have been published.”
Morgenson added that the process “allows companies to give their side of the story”—a pronouncement that will come as a surprise to any company whose reputation is called into question via the CFPB.
 
The major problem with this observation is Morgenson’s belief that the consumer must be 100 percent correct and the financial institution is always in the wrong. Not even the CFPB believes that. In the most recent edition of the annual Consumer Response Annual Report—which Morgenson omitted from her coverage—the CFPB admitted that 81 percent of the mortgage-related complaints were closed with an explanation, while only five percent were closed with non-monetary relief and three percent were closed with monetary relief. Only two percent of the cases involved mortgage companies that did not respond in a timely manner. And 63 percent of the consumers accepted closure of their complaints without dispute, while 23 percent disputed the resolution and the remaining percent was still pending when the report was released.
 
In her coverage, Morgenson conveniently failed to recall a few untidy aspects of the CFPB’s history and operations: The very low priority that the Obama Administration gave to the CFPB, which opened for business in July 2011 without a full-time director; the acute cost overruns on the construction of the CFPB headquarters; the repeated complaints of racial and gender discrimination in the CFPB workplace by agency employees; and the ongoing legal struggle to determine whether the agency’s single-director leadership configuration in constitutional (one court said it is not, but that is on appeal).
 
Also missing is the onerous compliance regimen that the CFPB has placed on financial institutions—including community banks and credit unions, neither of which were responsible for the 2008 crash—and the problems that have since resulted, ranging from a tightening of credit to increased delays in loan closings. Morgenson probably did not read the CFPB’s latest Monthly Complaint Report, which blamed “inexperienced loan officers” for delays in loan closing—when, in reality, data has confirmed that loan closings have become more pronounced since the implementation of the agency’s highly complex TILA-RESPA Integrated Disclosures rule.
 
Furthermore, Morgenson does not include what could be the CFPB’s most entertaining scandal: The Daily Caller, using Freedom of Information Act requests, recently discovered that CFPB Director Richard Cordray used a private mobile device for text messaging to lobbyists with the student loan industry. Cordray failed to back up the messages for official archiving, as required by law—and that could easily be used as grounds for dismissal if the legal ruling on the constitutionality of the agency’s leadership structure is upheld. To date, the Times has yet to admit that story exists.
Compliance