The Consumer Financial Protection Board has jettisoned its principal outside advisory group, an action widely interpreted as a sign of the financial regulator’s diminishing interest in championing strong consumer rights in the financial sector.
In a letter dated June 6, CFPB Acting Director Mick Mulvaney informed current members of the Consumer Advisory Board, a panel of attorneys and banking industry experts, that their services would no longer be required.
Also released from their advisory duties were members of the CFPB’s Community Bank Advisory Council and Credit Union Advisory Council.
Mulvaney’s office explained that the CFPB will reorganize the advisory groups into smaller units at a later date. Mulvaney’s letter informed CAB members that they were not eligible to apply for positions on the newly created boards.
The purpose of the smaller advisory boards is to “increase high quality feedback,” the letter said. Mulvaney also wrote the CFPB would be holding a greater number of town halls and roundtable discussions than it had in the past.
The CFPB’s consumer advisory boards were created in 2010 by the Dodd–Frank Wall Street Reform and Consumer Protection Act, a measure designed to promote financial stability in the wake of the 2007-2008 financial crisis, considered by many economists to have been the worst financial crisis since the Great Depression.
Section 1014(a) of the Dodd-Frank Act requires the CAB to convene two times a year to fulfill its purpose to “advise and consult with the [CFPB] in the exercise of its functions under the Federal consumer financial laws and to provide information on emerging practices in the consumer financial products and services industry, including regional trends, concerns and other relevant information.”
The CAB has not met since Mulvaney was appointed Acting Director in November 2017.
Dissenting Views Swept Out
Legal experts saw Mulvaney’s action as a sign that the CFPB is less willing to consider the pro-consumer views that typified policymaking during former Director Richard Cordray’s tenure.
Joann Needleman, a financial services and regulatory compliance attorney at Clark Hill in Philadelphia and CAB member from 2014-17, suggested that Mulvaney’s action was motivated by a clash of views between some advisory board members and current CFPB policymakers.
“In the past 6 months, many CAB members had disagreements with certain Bureau activities much like I did during my tenure, but I was never asked to leave,” she said. “Advisory Boards cannot and should not be a rubber stamp for if they were they serve no purpose.”
Needleman also lamented that future advisory boards, when created, will not have the benefit of current members’ experience.
Prof. David Reiss, a law professor at the Brooklyn Law School, said that dissolving the CAB in its current form is part of a larger plan to scale back the consumer protection mission of the CFPB.
“Firing the members of the advisory council is just one of many steps he is taking to do that,” he said. “While it is a very visible step, it pales in comparison to the less visible steps he is taking to reduce the Bureau’s enforcement and supervision activities throughout the consumer financial services sector.”
Changes Ahead for CFPB
Mulvaney was a frequent critic of the CFPB during his time in Congress, famously calling it a “sad, sick joke.” Shortly after his arrival at the CFPB, the agency’s mission statement was revised to assert a new focus on financial industry deregulation instead of consumer protection.
Mulvaney, who also serves as Director of the Office of Management and Budget, said June 12 that he expects President Donald Trump to name a permanent CFPB Director by June 22. Mulvaney will continue as Acting Director for most of 2018, allowing time for the Senate to confirm Trump’s director choice.
The firing of the CFPB’s current slate of consumer advisors promises to leave the new Director with wide latitude to staff and re-formulate the mission of the agency’s future advisory panels.