As Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB), prepares to run for governor in Ohio, he’s not leaving Washington quietly.
The CFPB is moving quickly to release a rule targeting the payday loan industry, which provides short-term loans to low-income borrowers in need of capital. Once the rule is released, the CFPB will require payday lenders to verify a borrower’s income, major financial obligations and borrowing history before issuing any loan. The agency has already issued a long list of “affordability criteria” to lengthen the payday lending process.
Current financial regulations governing short-term loans already make sure that customers know the terms and fees of their agreement, while the transaction itself remains quick and transparent. But the CFPB’s “payday rule” jeopardizes these transactions by imposing unreasonably high standards. It effectively eliminates the reason for choosing payday loans over traditional bank loans in the first place, erecting a barrier between low-income Americans and the credit they desperately need.
Payday loans aside, the CFPB’s decision to release the rule now reeks of politics. It suggests that Cordray is using his position as an “independent regulator” to advance his political fortunes in Ohio, whose gubernatorial election is in 2018. Targeting payday lenders — long vilified by left-wing activists — ingratiates Cordray with the Democratic base he needs to elect him.
According to Lucy Morris, a former CFPB deputy enforcement director, “There’s a lot of motivation to get this rule out while Cordray is around.” Why is that? Perhaps because the payday rule is perfect fodder for his 2018 campaign website.
This calls into question the Hatch Act, which prohibits federal employees from engaging in political activity. If Cordray is leveraging his position at the CFPB to score political points down the road, then he would be in violation of the law. Even the possibility of it should make President Trump consider firing him.
Due to the CFPB’s unconstitutional structure, the CFPB director can only be fired “for cause.” A violation of the Hatch Act would surely be cause enough.
Of course, the CFPB’s political weaponization should come as no surprise. According to a review of 2016 Federal Election Commission data on 15 U.S. agencies and departments, 100 percent of campaign contributions made by CFPB employees went to Democratic candidates. It ties the CFPB for the country’s most politically biased federal entity — alongside the National Endowment for the Humanities, National Transportation Safety Board and Peace Corps. Even the Obama administration’s Justice Department was more diverse in its workforce’s political preferences.
Ronald Rubin, a former CFPB enforcement attorney, claims that Republican applicants were regularly ruled out of agency jobs. “As screening techniques improved, Republicans were more easily identified and rejected,” Rubin says, culminating in a culture of “political discrimination.”
Part of the reason was Sen. Elizabeth Warren, D-Massachusetts, — the CFPB’s staunchest supporter — who “chose loyal Democrats to be her senior deputies” as she led the agency’s one-year development process in 2010 and 2011.
Whether you agree with the CFPB’s rulemaking or not, Cordray’s role as regulator-turned-politician should concern even the most ardent believers in Big Government. Liberals should also be concerned about the CFPB’s history of “allegations of discrimination based on an employee’s race, their age, gender (and) sexual orientation,” another blemish on the agency’s reputation.
Independent regulation and political gamesmanship have long been two separate spheres. Richard Cordray may be bringing them together to land a new job.
