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On Money

The Bureau of Resistance

Credit...Illustration by Andrew Rae

Three days after Donald Trump was sworn in as president, the United States government fined a couple of Citigroup subsidiaries $28.8 million for giving the runaround to tens of thousands of borrowers who were trying to avoid foreclosure on their homes. One week later, it sued a ring of law firms, accusing them of illegally levying high fees on desperate clients seeking to lessen their crushing debt loads. In the days that followed, the government took action against several others, including a California-based mortgage lender and a Virginia-based pawnbroker. It also ordered Mastercard and a partner to jointly pay $13 million in fines for “breakdowns that left tens of thousands of economically vulnerable RushCard users unable to access their own money.”

Don’t expect President Trump to boast about any of these good deeds, which were all undertaken by the Consumer Financial Protection Bureau. Nor is he likely to tweet with gusto if the bureau issues more rules in the coming months. These might include regulations on debt collectors, payday lenders and all those brand-name financial institutions that keep unhappy customers out of court through “mandatory arbitration” clauses buried in consumer contracts, voiding the option of filing lawsuits. In early February, a group of business leaders visited Trump at the White House, where the president promised to roll back many of the regulations imposed after 2008, when the financial industry’s recklessness nearly sank the world economy. “I have so many people, friends of mine that had nice businesses, they can’t borrow money,” Trump told his audience. That same day, he signed an executive order that gave the secretary of the Treasury (a position that would soon be filled by a Goldman Sachs alumnus) 120 days to provide a hit list of rules the administration could eliminate.

The independent C.F.P.B. emerged as a part of Dodd-Frank, the sweeping financial-regulation legislation passed in 2010 that Trump has repeatedly promised to dismantle. The idea, first proposed in a 2007 article by Elizabeth Warren, then a Harvard Law professor, was to create something like the Consumer Product Safety Commission, which develops standards and can recall items that pose unreasonable safety risks. Why not a commission to monitor financial products and services — and what Warren, as a senator from Massachusetts, continues to call the “tricks and traps” of the industry? Congress invested this new government watchdog with the authority to write and enforce rules to prevent “unfair, deceptive or abusive acts or practices.” To insulate the C.F.P.B. from political meddling, it is funded not by Congress directly but by the Federal Reserve, which, under Dodd-Frank, is required to set aside a portion of its yearly budget to pay for the bureau’s operations.

It doesn’t seem likely to slow down in response to a hostile White House. “It really shouldn’t change the job at all,” Richard Cordray said, just days after Trump was inaugurated. Cordray is the bureau’s director, a position President Obama first nominated him to in 2011. But as a result of some congressional infighting, Cordray’s five-year term in office does not include his time running the agency before his confirmation in mid-2013 — which means that at least until a few months before the midterm elections, in 2018, the deregulator in chief will be confronted with this small bastion of progressivism inside his own government.

Mortgage lenders were an early target of the bureau. It outlawed “no-doc,” or no-documentation, loans and deceptive teaser rates that lured borrowers into thinking they could afford a home loan. The C.F.P.B. also prohibited lenders from paying mortgage brokers to steer borrowers to loans with higher interest rates, a common practice in the lead-up to the subprime meltdown. Some of the big banks also came under scrutiny for pushing their customers to buy expensive, often unnecessary products. In 2014, for instance, the C.F.P.B. ordered Bank of America to return $727 million to customers duped by “deceptive marketing” and unfair billing into paying for relatively worthless credit-card “add-ons” like credit protection in the event of disability or a lost job. A year later, Citibank had to repay customers $700 million for similar transgressions. Since 2011, the agency has returned nearly $12 billion to 29 million consumers.

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Credit...Illustration by Andrew Rae

The C.F.P.B. has also set up a public database for consumer complaints. Other than big-dollar fines, nothing seems to irritate lenders large and small more than the public shaming that comes with showing up on this forum meant for all those customers who have spent countless hours on the phone fighting with giant student-loan servicers or credit-card companies. Businesses have 15 days to respond before a complaint is posted; to date, the C.F.P.B. has published more than 750,000 grievances on its website, along with a business’s response, if one is made public.

Trump’s “forgotten men and women” living on the economic fringes might be the bureau’s greatest beneficiaries. Millions of Americans rely on reloadable, prepaid cards because they’ve bounced too many checks or otherwise have no relationship with a bank. Last fall, the C.F.P.B. finalized regulations that would grant users some of the same protections enjoyed by credit-card customers, including liability limits on lost or stolen cards and easy access to account information. The bureau has also proposed restrictions on debt collectors and payday lenders, who can sometimes legally charge interest rates exceeding what would be 400 percent annually for the two-week loans they provide to the working poor. A trade association representing the payday-lending industry declared that these proposed rules, which would require lenders to either determine a borrower’s ability to repay a loan or set a limit of no more than three two-week loans in a row, would put thousands of lenders out of business.

Cordray signed off on the final prepaid-accounts rule in October — yet that might not have been fast enough. The Congressional Review Act, a vestige of the Gingrich years, gives Congress a brief window to undo certain new federal regulations it does not like. The act was used only once successfully in the 20 years after it was passed in 1996, but in the last three months it has enabled the elimination of 12 Obama-era rules and been invoked more than two dozen times. These include a resolution introduced by Senator David Perdue, a Republican from Georgia (home to TSYS, the parent company of Netspend, a major player in the prepaid-card world), that could erase the bureau’s rule for prepaid accounts. The same could happen if the C.F.P.B. issues new regulations for arbitration, payday loans or debt collectors.

Can the C.F.P.B. survive the Trump years? His election certainly gives hope to all those big banks and fringe lenders that feel themselves under attack by Cordray. In mid-February, Ted Cruz in the Senate and John Ratcliffe in the House introduced bills that would simply abolish the bureau. Yet a recent poll showed that Trump voters, by a 2-to-1 margin, want the bureau left alone, if not strengthened. The C.F.P.B. seems too popular to simply shut down.

So the strategy in Washington has been to defang it rather than eliminate it altogether. Industry groups and their Republican allies in Congress have proposed replacing the position of a single director with a bipartisan, five-person commission that would typically require at least three yes votes before any significant actions could be taken. If this came to pass, the bureau could join all those other dysfunctional bodies — just look at the Securities and Exchange and Federal Election Commissions — whose structure waylays all but the mildest of rule changes. Another bill would switch the C.F.P.B.’s funding model, forcing it to go hat-in-hand to Congress every year.

Still, the Democrats have Elizabeth Warren, who has shifted the center of gravity within Democratic politics, at least on issues of fairness and economic reform. Democrats who waver in their support of the C.F.P.B. — or Dodd-Frank generally — can expect to hear from Warren. “Democrats who used to work with us are scared to death of crossing Warren,” one Republican congressional staff member told me back in February. The populist right has the RINO, a Republican in Name Only. The populist left seems to be developing a new counter-species: the Democrat in Name Only, or DINO. You’re either a staunch defender of the C.F.P.B. and Dodd-Frank or you’re a tool of Wall Street. “I’d be more worried about the C.F.P.B.,” says Dennis Kelleher, the president of Better Markets, which pushes for tighter regulation of financial institutions, “if there wasn’t a Black Hawk helicopter circling it manned by Elizabeth Warren.”

For the moment, the C.F.P.B. seems to be a full-throated expression of resistance: a government watchdog doing its job, despite a chief executive who resents its mission. But even if Warren and her allies repel legislative attempts to weaken the C.F.P.B., Trump will still get to name Cordray’s replacement. What will be good news for big banks and fringe lenders will be sad news for the forgotten who thought they were sending a champion to the White House.

Gary Rivlin, a former Times reporter, is an Investigative Fund fellow at the Nation Institute.

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A version of this article appears in print on  , Page 18 of the Sunday Magazine with the headline: The Bureau of Resistance. Order Reprints | Today’s Paper | Subscribe

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