The Bankers’ New Friend


CFPB will protect bankers from wrongdoing penalties

Operational changes at the Consumer Financial Protection Board are welcome news to financial industry wrongdoers. Mick Mulvaney, selected by Trump as Deputy Director of the CFPB, was on record as wanting it eliminated. Instead, Mulvaney has changed the agency mission from protection of consumers to protection of corporations. Example: Fines for corporate wrongdoing will apparently be waived if corporations tell the truth about cheating consumers and give back what they took. How Citibank’s latest abuse of consumers was handled by the CFPB is a sign of the new times.

Citibank was once again caught illegally charging consumers for services that customers were misled by or did not even know of. But this time Citi caught itself. As a reward for its good behavior, the Consumer Financial Protection Board is satisfied by Citi’s return of the $300 million Citi that—depending on your point of view—either collected or stole from consumers. No penalties for corporate wrongdoing because of the “rightdoing” of a payback.

Does the new CFPB think Citi management has been born again? That from now on, when Citi  cheats consumers with tricky fees, Citi will go public and pay up? It would be pretty to think so.

But before we can believe there is a new Citi in town, more evidence is needed, like Citi firing managers who think up and the top execs who approve schemes to cheat customers—or pay plans that incentivize cheating. As for consumer paybacks, compensation should include a “voluntary” penalty fee like 10% if paid back within 6 months and 20% per year after that. That would be tangible evidence of banks holding themselves fully accountable for wrongdoing.

The absence of tough CFPB penalties for Citi signals corporate wrongdoers to now rely on CFPB to look after their interests rather than consumer interests. Returning only what was paid rewards the banks and hurts consumers because the purchasing power of the dollars returned is diminished by inflation.

Instead of getting rid of the CFPB, Mulvaney has converted it into another regulatory ally of corporate wrongdoers. Mulvaney, who is stepping down as deputy director, will turn things over to Brian Johnson, who has been its policy director.   The financial folks may want its new friend to stay in place

Finally, given Trump’s love for corporations, is it possible that the new CFPB discovered the fee scheme and alerted Citi before the story got out? And that was when and why Citi went public.

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