Consumer Financial Protection Bureau (CFPB) Director Richard Cordray and his staff have repeatedly claimed that its customer complaint portal serves as a regulatory compass to guide the agency's areas of focus and enforcement actions. However, the CFPB continuously ignores data and consumer feedback, particularly as it relates to real-world customer stories on short-term lending.
Director Cordray recently repeated these inaccurate claims at the 2017 People and Places Conference. Below is a snapshot of how Director Cordray's words measure up against the Bureau's actions.
Claim: "[The consumer complaint portal] helps prevent the Consumer Bureau from developing either a mentality of 'regulatory capture' by industry or an 'ivory tower' mentality of 'we know best' what consumers need."
Reality: The Bureau uses flawed in-house data (that is not subject to government research standards or peer review) as a pretext for its ideologically-driven agenda, and colludes with consumer activists groups on its shared mission to eliminate short-term lending. Complaints regarding short-term loans have accounted for just 1.5 percent of all complaints received since the portal went live - and only about one-seventh of those complaints are about state-regulated, storefront lenders. Further, documents reveal that the CFPB had buried more than 12,000 positive testimonials from short-term loan customers submitted through its "Tell Your Story" portal. These positive testimonies comprise 98 percent of the total comments submitted to the CFPB through this portal.
Claim: "We are giving consumers a voice, so they can address their own concerns and report on broader patterns of problems or abuse. These are just some of the ways we are standing up for consumers."
Reality: The CFPB has continuously ignored the vast majority of consumers who value short-term loans. The Bureau received more than one million comments during the public comment period for its proposed rule on short-term lending. Roughly nine out of 10 of those comments were in sharp opposition to the rule. Despite this, Director Cordray recently testified that "[W]e've gotten, as I said, many, many comments on both sides of that issue," providing a disingenuous and inaccurate accounting of the overwhelmingly negative response to the proposed rule. To mute the voice of consumers who spoke out against the rule, the Bureau classified thousands of consumer comments as duplicative, mass mail or form letters when they clearly are not.
Claim: "Because we can assess the entire field of play, we can work to keep it level for all participants."
Reality: The CFPB's proposed rule on short-term loans does just the opposite and would in fact hand-pick winners and losers in the financial services marketplace. The clear winners would be high-cost alternatives to regulated short-term lending such as bank and credit union overdraft protection programs and a quagmire of unlicensed lenders, many of which operate exclusively from offshore locales. Meanwhile, consumers lose as small storefront lenders will "cease to exist under the Bureau's proposed rule," according to Rick Hackett, former CFPB assistant director, severely restricting access to reliable, regulated short-term credit.
Claim: "By being strategic about the actions we take, as well as by providing clear guidance about what we have found and the conclusions we have drawn, we try to get the most "bang for the buck" out of the limited set of actions we can bring ourselves."
Reality: The Bureau intentionally blurs the distinction between legal and illegal lending in public remarks and in consumer complaints - unfairly lumping state-licensed and regulated businesses together with unregulated lenders and scam artists. The Bureau has repeatedly shared stories of Pennsylvania borrowers who were taken advantage of by lenders - failing to acknowledge that storefront short-term lending is banned in Pennsylvania and consumers in these stories had undoubtedly borrowed from an illegal lender. This approach muddled the Bureau's conclusions, resulting in a lengthy proposed rule on small dollar lending - spanning 1,333 pages - that creates a more complex lending and borrowing environment for operators and consumers alike, and does nothing to address offshore, unregulated lenders that pose the greatest threat to consumers.
We urge the Bureau to heed the voices and experiences of consumers across the nation and preserve broad access to short-term consumer lending.