RSSThe CFPB is chomping at the bit to paint itself as consumers’ financial avenger. Unfortunately, the CFPB’s marketing department is so interested in shaping the bureau’s image that it has started to leave fact behind. In fact, the disparity between the CFPB’s press releases and its consent orders has become so noticeable in certain cases that its Ombudsman will conduct an independent review of consent orders and their corresponding CFPB press releases in 2013 and 2014. (See page five of the CFPB Ombudsman’s 2014 report.)
One example from August 2014 is the mismatch between CFPB’s press release and the consent order involving Texas-based First Investors Financial Services Group Inc. The press release called the company “an auto finance company that distorted consumer credit records for years.” The word “distort” signifies a conscious twisting awry of consumer information. The consent order’s language, however, doesn’t contain one use of the word “distort.” In fact, the consent order only says that the company knew it was reporting inaccurate information. The case is negligence not active deceit, according to the consent order.
First Investors Financial Services Group’s negligence was unacceptable. As CFPB Director Richard Cordray said in a press conference announcing the consent order, “using a flawed computer system does not get you off the hook.” For it negligence, which caused obvious harm to consumers, the company paid a civil money penalty of $2.75 million. However, as much as the CFPB would like to say it caught a predator, it didn’t.
Another example is the December 2013 consent order between Ally Financial, the CFPB and the U.S. Department of Justice. The consent order says Ally allowed discrimination when it allowed dealerships to set the amount of interest they charge on top of Ally’s rate, as compensation for helping arrange the loan. The company paid $80 million because the CFPB said the policy opened the door to discrimination against minorities and others.
The press release, however, reports Ally is guilty of “harming more than 235,000 minority borrowers.” Again, the marketing department at the CFPB, in efforts to paint the bureau as a Rottweiler sniffing out predatory financial institutions, has departed from fact to such a distance that it becomes a flat out lie. Ally only had indirect control over the prices set at the dealership; if anyone “harmed” consumers directly it was the dealerships.
No matter if you’re a bank or the bureau, it takes vigilance to keep the marketing department’s messaging in line. If, however, marketing and reality fall out of sync for a bank, the consequences are much more onerous than for the CFPB. The regulator gets a slap on the wrist from their ombudsman; the bank can get million-dollar fines and possibly millions more in lost business from negative press.
The CFPB is a unique regulator. It focuses on protecting consumers. It has been as aggressive on truth in product disclosures as it has been on fair lending. If it misleads the consumers it is meant to protect, is it any better than a predatory bank? Perhaps only in quantity but not in quality.
