It’s no secret the CFPB has close ties to consumer activist groups such as the Center for Responsible Lending—many of the agency’s first staffers were former CRL employees. But newly-released emails confirm the Center for Responsible Lending had a heavy hand in crafting the CFPB’s rule to impose limits on short-term loans.
As POLITICO reports, “The Center for Responsible Lending spent hours consulting with senior Obama administration officials, giving input on how to implement the rule that would restrict the vast majority of short-term loans with interest rates often higher than 400 percent. The group regularly sent over policy papers, traded emails and met multiple times with top officials responsible for drafting the rule.”
So what is the Center for Responsible Lending? CRL is a nonprofit advocacy group founded by Herb and Marion Sandler, billionaires who made their fortune in the subprime mortgage industry. The Sandlers’ bank, Golden West Financial, specialized in adjustable rate mortgages. The interest rates on these mortgages often ballooned, forcing borrowers to pay thousands of dollars more for monthly loan payments. These irresponsible loans were blamed for heavily contributing to the 2008 financial meltdown. Ironically, CRL’s mission is to crack down on such “predatory” lending practices.
Even more troubling is that CRL has a financial interest in pushing the CFPB to crack down on the payday lending industry. POLITICO states, “At the same time, the group’s financial services business, Self Help Credit Union, was pushing CFPB to support its own small-dollar loan product with a much lower interest rate as an alternative to payday loans.”
It’s not uncommon for the federal government to work with outside advocacy groups to craft new regulations. But as the emails obtained by POLITICO show, CRL’s influence went well beyond typical practices.
Unfortunately, there’s no effective oversight to provide a check on the CFPB’s misguided rulemakings. Until Congress has the authority to change the bureau’s funding levels, the CFPB can continue allowing activists funded by architects of the last financial crisis to write sweeping new federal regulations without fear of Congressional rebuke. It’s hard to see how that’s effective “consumer protection.”