Next Tuesday, the U.S. Supreme Court will hear oral arguments in a case that could have far reaching effects on the legislative ability of Congress to have flexibility in how it funds regulatory agencies, as well as place in jeopardy the survival of the Consumer Financial Protection Bureau (CFPB), a government watchdog for the little guy, elderly, young, poor and unsophisticated against goliaths on Wall Street and other financial predators.
The case arrives at the Supreme Court as a result of a decision handed down in October by a three-judge panel at the right-wing 5th Circuit Court of Appeals. All three judges on the panel (Don Willett, Kurt Engelhardt, and Cory Wilson) were appointed by former President Donald Trump. The 5th Circuit effectively ruled that the CFPB’s funding system, legislated by Congress, was unconstitutional.
The shadow of Trump and the invisible hand that had an outsized role in setting the agenda for his administration, fossil fuels billionaire Charles Koch, and his corporate law firm – Jones Day – have their footprints all over this case. On Trump’s first day in office, January 20, 2017, Jones Day announced that 12 of its law partners were moving into the Trump administration. Among the 12 was Noel Francisco, who became Trump’s Solicitor General. Francisco is now one of the five Jones Day lawyers representing the opposing side at the Supreme Court attempting to gut funding for the CFPB.
Gutting the funding and power of federal regulatory agencies is something that Charles Koch and his myriad front groups have been attempting to do for the past 40 years.
Right wing Republicans and corporate interests have been attempting to kill the CFPB since it was created under the Dodd-Frank financial reform legislation of 2010, following the financial crash of 2008. Dodd-Frank and the creation of the CFPB came in response to the greatest fraudulent wealth transfer from the middle class to the 1 percent since the Wall Street frauds of the late 1920s. Both periods devastated the U.S. economy for years and left millions of Americans unemployed.
Mega banks on Wall Street and other bad actors are particularly hostile to the fact that the CFPB allows consumers who have been victimized by financial firms, even where small amounts of money are involved, to file a complaint with the CFPB, who then demands a timely written explanation from the alleged wrongdoer. Bad actors dislike the fact that these complaints go into a permanent database at the CFPB, which can be mined by the public, reporters, class-action attorneys and prosecutors looking for patterns of fraud.
On May 15, Senator Sherrod Brown (D-OH), Chairman of the Senate Banking Committee and Congresswoman Maxine Waters (D-CA), Ranking Member of the House Financial Services Committee, led 144 current and former members of Congress in filing an amicus brief in the case: Consumer Financial Protection Bureau (CFPB) v. Community Financial Services Association of America (CFSA). Their amicus brief argues that when Congress established the CFPB after the 2008 financial crisis, a judgment was made that the CFPB, like other financial regulators, needed independence from unpredictable annual funding cycles to be effective. As legislated in the Dodd-Frank Act, the CFPB is funded through the Federal Reserve. Congress maintains oversight authority of the CFPB, and the Director of the agency testifies regularly before Congress.
The CFSA, the opposing front group, which cleverly put the homespun word “Community” in its name, is the evil twin sister of the CFPB. It’s a pool of financial sharks, including payday lenders, who don’t want a well-funded federal investigatory agency looking into their predatory practices against financially-strapped and/or financially unsophisticated Americans.
Accountable.US, the nonprofit watchdog, describes the company representatives that make up the Board of Directors of CFSA as follows:
“In January 2019, Enova was fined $3.2 million by the Bureau for debiting consumer bank accounts without their authorization. In November 2013, Cash America International, Enova’s parent company at the time, was fined $5 million by the CFPB and forced to pay $14 million in refunds for ‘violat[ing] the Military Lending Act by illegally overcharging servicemembers and their families.
“In April 2020, PROG subsidiary Progressive Leasing paid $175 million to settle a Federal Trade Commission lawsuit alleging the lender ‘frequently’ misled consumers by charging consumers twice the advertised ticket price for payments on rent-to-own items. Then-FTC director Kelly Slaughter said, however, ‘the settlement did not go far enough,’ as consumers ultimately paid ‘more than $1 billion in extra fees and charges.’
“In August 2011, QC Holdings agreed to pay $1.9 million to settle a class action lawsuit alleging the company violated Missouri law by ‘charging exorbitant rates’ and ‘renewing payday loans too many times.’ “
CFSA is a nonprofit, which means that at least part of its annual tax filing with the IRS (form 990) is a public document. The 990s show that Jones Day is not just representing CFSA at the Supreme Court but that Jones Day has been its law firm dating back to at least 2016. The annual amounts received by Jones Day from CFSA are as follows: 2021 – $751,150; 2020 – $377,019; 2018 – $571,822; 2017 – $516,150; and 2016 – $574,613.
The hatred of the CFPB is so strong by predatory financial actors that another front group, American Action Network, launched a $500,000 ad campaign during the November 10, 2015 Republican presidential debate, comparing the advocate for the little guy to a communist organization. The ad features giant banners of then CFPB Director, Richard Cordray, and Senator Elizabeth Warren, who pushed for the creation of the agency, hanging on the front wall in a nod to Soviet dictators.
The advertisement was a masterpiece of misinformation, overtly suggesting that the job of the CFPB is to deny car loans and mortgages to regular folks seeking credit. The agency, in fact, has absolutely nothing to do with approving credit applications. Its job is to root out and punish financial institutions that are ripping off customers. For example, just four months before the ad was released, the serial miscreant, Citigroup, was ordered by the CFPB to reimburse an estimated $700 million to 7 million of its credit card customers for deceptive marketing and billing for services that were never provided. (For what CFPB has been up to more recently, scroll down here.)
According to the New York Times, American Action Network, the front group that funded the ad, had admitted that keeping private justice systems alive for corporations, known as mandatory or forced arbitration, was one reason behind the $500,000 outlay for the ad. The Times noted:
“Its sponsor wants to rein in the agency in part because of its efforts to restrict arbitration — the widespread practice in corporate America of requiring customers and employees to resolve disputes not in the courts, but in private proceedings with neither judge nor jury. In fact, arbitration is one of the reasons the ad’s sponsor, American Action Network, wanted to blast the agency with the $500,000 campaign, the group said.”
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