Ronald Rubin, a former enforcement attorney for the Consumer Financial Protection Bureau, has weighed in on the controversy swirling around the bureau. Rubin, who worked at the CFPB in 2011 and 2012, claims that it is a highly partisan organization. He made the claims in an article in National Review last week.
In his article, Rubin recounts the unique structure of the CFPB. Dodd-Frank created an agency funded through the Federal Reserve rather than Congressionally appropriated taxpayer dollars, and led by an appointed single director removable only for cause during a five-year term. Though these elements were meant to free the bureau from political control, Rubin claims that the CFPB is actually “an omnipotent liberal-advocacy organization devoid of Republican participation and immune from legislative oversight.”
Rubin cites a new poll that suggests Democratic claims about the nature of the CFPB actually reflect “a popular fictional agency.” About four in five Americans approve of the bureau’s official anti-fraud mission, according to the poll, while the same proportion has never heard of the CFPB.
It is even less known, according to Rubin, that the bureau’s most powerful division is External Affairs, who he calls “the media spin doctors.” Rubin claims that External Afffairs has a strong voice in bureau enforcement actions. He claims to have “observed this perverse hierarchy while working at the CFPB.” In addition, he claims that “a senior bureau official” told him that External Affairs often vetoes rulemaking initiatives because they lack sufficient “publicity potential.”
Partisanship plays a significant role at the CFPB, according to Rubin. He notes that the bureau’s first major task was writing “Ability-to-Repay/Qualified Mortgage” rules to prevent a recurrence of the mortgage crisis. Studies consistently found that homeowner equity was the single best deterrent to defaults, so CFPB economists included mandatory down payments in early drafts of the rules. According to Rubin, liberal advocacy groups objected that such standards would harm low-income minority applicants with no savings, and successfully lobbied to remove the down payment requirement.
Rubin claims that ultimately the partisanship compromises the bureau’s effectiveness. Though the CFPB has issued more than one billion dollars in fines, the fines have not been fair, he claims. Many companies with mild, unintended compliance issues have seen the largest penalties. According to Rubin, “Once defenseless businesses learned that treating consumers honestly and maintaining good compliance programs would not save them from politically motivated CFPB enforcement actions, the fines lost most of their power to incentivize good behavior.”