The federal government’s consumer financial watchdog broke a four-month enforcement lull on Friday, but one rain shower does not necessarily end a drought.
The U.S. Consumer Financial Protection Bureau brought its first enforcement action against a company since Trump appointee John M. “Mick” Mulvaney took charge in November 2017.
And it was a doozie – a $1 billion fine against Wells Fargo for unfair auto lending and mortgage rate practices.
Bank regulator Office of the Comptroller of the Currency partnered in the crackdown and issued a $500 million fine of its own, which offsets half the CFPB fine. Payments for harmed consumers, yet to be determined, are on the way.
It was the biggest single fine in CFPB history, yet it is far from clear that the agency is resuming the active watchdog role it played under founding director Richard Cordray.
Under Cordray, the agency had announced 22 enforcement actions by this time last year.
Under Mulvaney, more CFPB crackdowns dropped than enforced
“Does this mean the CFPB is back on the job? No,” said Ed Mierzwinski, consumer program director at U.S. Public Interest Research Group.
Mulvaney has actually dropped more crackdowns than he has carried out, Mierzwinski noted, benefitting high-rate lenders including Golden Valley Lending and NDG Financial Corp.
“We’re hopeful Mulvaney’s reign over the CFPB is short,” Mierzwinski said, “and the president nominates someone who believes in its mission.”
“Good start, but it shouldn’t take this massive scale of abuse to consumers for regulators to take action,” the National Consumer Law Center said in a tweet responding to the CFPB fine. “Mick Mulvaney should step up enforcement efforts across the board.”
While the Center for Responsible Lending applauded the penalty on Wells Fargo, it said in a news release it expects more active consumer protection by the OCC and CFPB.
“There have been worrying signs of lax regulation by these agencies, especially related to payday loans, which regularly exploit low-wealth Americans,” executive vice president Debbie Goldstein said in a statement.
Mulvaney: Fine to Wells Fargo doesn’t change CFPB approach
In announcing the penalty, Mulvaney signaled that the move does not change his moderate approach to consumer protection.
“As to the terms of the settlement: We have said all along that we will enforce the law,” he said in a news release. “That is what we did here.”
Mulvaney has criticized Cordray – who left the job to run for governor of Ohio – for “pushing the envelope” with aggressive enforcement crackdowns that he said went beyond the letter of consumer protection law.
The bureau’s consent order – essentially a settlement with Wells Fargo – says the bank disclosed the unfair practices to the regulator and has begun making refunds to borrowers on its own.
- With mortgages, Wells Fargo sometimes charged borrowers to extend a rate lock period, even when the delay in closing was caused by the bank.
- With auto loans, Wells Fargo required many borrowers to buy insurance protecting the bank from default even when the vehicle – collateral for the loan – was already insured.
- The practice caused about 2 million borrowers to pay for unnecessary insurance, sometimes making the loan unaffordable and pushing them into default.
Cordray: CFPB staff deserves praise, not new leadership
Cordray credited CFPB workers for carrying out the crackdown, which was underway when he left the agency.
“Despite the nasty snarkiness from squatter CFPB leadership, I am glad to see the work we got underway when I was running the Bureau is still paying dividends,” he said on Twitter, “even as the Trump Administration generally is actively undermining consumer protections.”
See related: CFPB rollback of payday loan protection draws criticism, Under Trump appointee, CFPB is reversing consumer protection