Article by Christopher L. Peterson
The Great Recession and its aftermath deeply scarred the United States. While estimates vary, approximately 9.3 million U.S. families lost their homes to foreclosure or short sales. In the aftermath of the financial collapse, nearly $11 trillion in household wealth vanished. Years after the crisis, about 7.5 million families still owe more on their mortgage loans than the current value of their homes. Approximately 7.9 million U.S. jobs disappeared, and the seasonally adjusted mean duration of unemployment nearly doubled the peak duration in prior modern economic downturns. These macroeconomic trends rippled out to profoundly damage the lives of millions of Americans. The number of homeless families nationwide increased by 4% from 2008 to 2009. Neighborhoods stricken by foreclosures faced significant increases in crime. Reflecting growing financial uncertainty and stress, sociologists found that the Great Recession was strongly associated with significant increases (a sixfold increase by one measure) in the likelihood that children would fall victim to physical abuse. Epidemiologists and economists have discovered an association between home mortgage foreclosure and significant increases in sickness, including heart attack, stroke, respiratory failure, gastrointestinal hemorrhage, and kidney failure. Studies suggest that the foreclosure crisis was partially responsible for a 13% increase in the national suicide rate and a 35% increase in the number of households facing food insecurity. The causes and consequences of the Great Recession are undeniably complex. And although there are as many honorable and well-meaning people and companies in the consumer finance industry, there can be no serious debate that consumer financial services gone awry can intensely harm American families.
In the wake of this financial catastrophe, the public demanded, and the United States Congress delivered, the most transformative financial reform since the 1930s. While the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) included many changes, its centerpiece was the creation of the new Consumer Financial Protection Bureau (CFPB or Bureau). The brainchild of the charismatic Harvard Law professor Elizabeth Warren, the newest federal agency describes itself as a “21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.” The agency further describes its “core functions” thus:
We work to give consumers the information they need to understand the terms of their agreements with financial companies. We are working to make regulations and guidance as clear and streamlined as possible so providers of consumer financial products and services can follow the rules on their own.
Congress established the CFPB to protect consumers by carrying out federal consumer financial laws. Among other things, we:
• Write rules, supervise companies, and enforce federal consumer financial protection laws
• Restrict unfair, deceptive, or abusive acts or practices
• Take consumer complaints
• Promote financial education
• Research consumer behavior
• Monitor financial markets for new risks to consumers
• Enforce laws that outlaw discrimination and other unfair treatment in consumer finance.
Despite the agency's seemingly benign mission statement and purpose, it has faced dogged, and at times vitriolic, opposition from some in the financial industry. Some political leaders with close ties to the banking and consumer finance industry have argued that the CFPB
is a “runaway agency,”
is an example of “how socialism starts” and “a vast bureaucracy with no congressional oversight,”
is a “rogue agency that dishes out malicious financial policy,”
takes actions that are “misguided and deceptive,”
“continually oversteps its bounds,”
has aspects similar to “the Stalin model,” and
is a “nanny state mechanism.”
These claims have in turn provided rhetorical support for dozens of congressional bills aiming to eliminate, defund, or weaken the agency in some procedural or substantive respect.
A complete discussion of the merit of these claims or the pending legislation they purport to justify is well beyond the scope of this Article. Instead, this study evaluates the actual track record of the CFPB in one important respect: the congressional directive that the agency enforce the nation's consumer financial protection laws. Today, the CFPB's Division of Supervision, Enforcement, and Fair Lending (SEFL) has been open for business for over four years. The public has a right to expect that the CFPB has created an agency that will protect Americans from the all-too-real financial, mental health, and physical harms associated with illegal consumer financial practices. To this end, this study gathers quantitative and qualitative information in hopes of providing an answer to a simple, but critically important, question: Has the United States succeeded in creating an effective consumer financial civil law enforcement agency?
This Article presents the first empirical analysis of all publicly announced CFPB enforcement actions. Part II provides a background discussion summarizing the CFPB's enforcement authority, jurisdiction, and powers. Part III explains the study's simple, descriptive methodology. Part IV reports results. Part V sets out seven noteworthy findings, and Part VI briefly concludes. To assist policy makers, courts, legal counsel, academics, and students studying the CFPB's enforcement work, an appendix identifying every publicly announced CFPB enforcement action through 2015 follows.
About the Author
John J. Flynn Professor of Law, University of Utah, S.J. Quinney College of Law, and Special Advisor, Office of the Director, Consumer Financial Protection Bureau.
90 Tul. L. Rev. 1057 (2016)