A Consumer Financial Protection Bureau task force that has been criticized in the past for its pro-business leanings stands to earn hundreds of thousands of dollars to offer advice on how to “harmonize and modernize” federal laws aimed at protecting the public.
The task force members’ prorated salaries are near the top of the pay scale for the CFPB, an agency frequently criticized by Republican lawmakers for paying its staff more generously than most other federal agencies.
“This looks like a plan to draft a far-right wing agenda for gutting 40- to 50-year-old consumer protections, on the public’s dime,” said Diane Thompson, a former top CFPB official and now an attorney at the National Consumer Law Center.
The Taskforce on Federal Consumer Financial Law consists of five outside conservative academics and industry lawyers who have represented payday lenders in CFPB enforcement actions and consumer litigation, as well as banks and other companies in regulatory matters. It is not subject to balance and transparency requirements of other federal advisory boards.
The task force, chartered in January, is led by free-market financial services and bankruptcy scholar Todd Zywicki of George Mason University. Its purpose is to deliver a report by the end of the year with recommendations for rewriting the laws governing how people get mortgages, credit cards, bank accounts and other financial services.
The findings will not be binding, but could serve as a blueprint for future Congresses and regulators to unwind a host of existing rules at the agency, which was created in the wake of the 2008 financial crisis under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
A CFPB spokesperson said the agency had conducted a robust selection process and selected “highly skilled and respected professionals” for the task force.
Zywicki’s salary of $142 per hour comes to about $226,944 for full time work at the 200-day maximum he’s permitted to work, according to information obtained through separate Freedom of Information Act requests filed by Bloomberg Law and by Public Citizen.
The other members, who are capped at 130 days of work, are paid around $104 per hour. The salary for one of its members, Jean Noonan, includes a separate federal annuity.
If the task force members work full time for all the allowed days, their total compensation would come to more than $600,000. The figure doesn’t include salaries for permanent CFPB employees detailed to assist the task force or other expenses.
By contrast, members of the CFPB’s four advisory boards serve on a voluntary, unpaid basis and were only reimbursed for travel expenses. The CFPB’s Consumer Advisory Board, one of four advisory boards, had an estimated operating cost of around $205,000, according to its 2019 charter.
Exactly how many hours the task force members will work is an open question. None responded to requests for comment for this story.
Zywicki has long called for the CFPB’s authority over the consumer finance industry to be curtailed, telling Congress in 2015 the agency had “constantly expanded its power, promoted its own bureaucratic interests at the expense of the public, and trampled under foot other public policies, such as consumer choice and financial innovation.”
Zywycki is joined on the task force by regular research collaborator Thomas A. Durkin, a former Federal Reserve economist and former chief economist at the American Financial Services Association, an industry lobbying group.
The task force also includes three former top Federal Trade Commission consumer protection division officials—J. Howard Beales, a former George Washington University professor who has previously consulted for American Express, Visa and Mortgage Insurance Companies of America; William C. MacLeod, who chairs Kelley Drye & Warren LLP’s antitrust and competition practice group; and Noonan, a partner at Hudson Cook LLP.
Beales has also provided expert testimony for CashCall, a payday lender, in a 2015 CFPB enforcement action, and served as an expert witness for Think Finance, another payday lender, in the course of its bankruptcy proceedings following the CFPB’s case against it.
Noonan represented Nissan Motors’ financing arm in a 2019 settlement with the Justice Department, and represented a furniture retailer in a 2014 CFPB enforcement case involving allegations of Truth in Lending Act violations.
MacLeod’s biography notes “he has resolutely fought onerous regulations and advocated sensible, viable policies on competition, biotechnology, health and privacy” for his clients.
The task force members’ potential conflicts of interests raise concerns, said Jeff Hauser, executive director of the Revolving Door Project.
“The most obvious problem is they will continue to have economic relationships with entities that have an equity in the decisions that this task force will be recommending,” he said.
Unlike permanent federal employees, the task force members won’t be subject to a cooling-off period, Hauser said. “They will not be limited in their ability to revolve out and immediately get compensation for the work that they are doing,” he said.
The task force is an intra-governmental committee not subject to the Federal Advisory Committee Act (FACA), unlike the bureau’s four advisory boards, a CFPB spokesperson confirmed.
The group’s structure outside of FACA and the classification of its members as “special government employees” raises concerns about the CFPB’s efforts to circumvent the intent of federal hiring practices, Hauser said.
SGEs whose roles aren’t defined by statute are generally intended to be brought on as temporary, technical experts when their skills aren’t present in a federal agency’s workforce, he continued.
“This is a policy-making force,” Hauser said. “SGEs are typically not granted this much policy-making authority,” he added.
‘Big Picture’ Questions
The CFPB began taking a second look at its operations and the rules it oversees once former director Richard Cordray walked out the door in November 2017.
Former Acting Director Mick Mulvaney issued a series of requests for information looking at both discrete bureau operations and its regulations beginning in January 2018. Nothing really came out of those RFIs, however.
The task force is different because it is taking a look at some “big picture” questions the RFI process did not, said Alan Kaplinsky, co-lead of Ballard Spahr LLP’s consumer financial services practice.
“A task force seems to be a better way of approaching (and making progress on) these issues than leaving them to CFPB staff who are likely to constantly be sidetracked by day-to-day issues,” Kaplinsky said in an email.
CFPB Director Kathleen Kraninger announced the task force in October, putting out a request for applicants.
Kraninger’s team interviewed at least four professors with backgrounds in consumer advocacy.
One of them, Kathleen Engel of Suffolk University Law School, said that she was interviewed by Chris Mufarrige, a former CFPB policy staffer now at Wilson Sonsini Goodrich & Rosati. Mufarrige declined to comment.
The interview focused not on Engel’s professional experience, which included serving on the CFPB’s Consumer Advisory Board, but on her views on specific financial regulations, Engel said.
“The interview was much more of an interrogation,” Engel said.
Engel raised her concerns to Kraninger in a November 2019 letter obtained by Bloomberg Law. Kraninger never responded, Engel said.
Anne Fleming, a professor at Georgetown University Law Center, also interviewed for a spot on the task force with Mufarrige and one other CFPB official. She reported a more traditional interview experience complete with apparently scripted questions.
“The questions, as I recall, were more open-ended about how I thought the task force should approach its work,” Fleming said in an email.
Fleming was not selected for the task force.
The CFPB ultimately chose no consumer advocates, something that could be a problem when the task force releases its report later this year.
“It seems like it is a good idea to have a strong consumer-side person on the task force to build buy-in from the consumer side with its work product,” Kaplinsky said.
The group also plans to seek input from the bureau’s unpaid advisory committees, which are subject to FACA, and has also consulted with 12 outside consumer advocacy and trade groups and market participants, the bureau spokesperson said.
The task force released a request for information on March 27. The comment period closes on June 1.
Advocacy groups are worried about whether the group will be operating in the sunshine or not, and several have criticized the group for its lack of diversity of views.
“We have serious concerns about the transparency of this task force,” said Rebecca Smullin, an attorney with Public Citizen, a consumer advocacy group. “The CFPB has not indicated it will open any meetings to the public.”
Ethics waivers handed to two members of the committee, allowing them to participate despite stock holdings in several top financial services firms, raise even more questions, the Senate Banking Committee’s top Democrat said.
“Director Kraninger stacked the task force with representatives of payday lenders, Wall Street banks, and other corporate interests,” Sen. Sherrod Brown (D-Ohio) told Bloomberg Law in a statement.
Beales and MacLeod obtained ethics waivers from the CFPB to work on matters generally related to Amazon.com, Bank of America and Visa, among a handful of other CFPB-regulated companies in which they hold stock. The two are still prohibited in matters involving parties that would directly affect those companies, according to statements they provided to the CFPB ethics office.
In a statement to the CFPB ethics office, MacLeod said he wouldn’t participate in matters that would directly or predictably affect the financial interests of his law firm, unless he obtains a waiver.
“Two of the task force members previously worked to help defend payday lenders from CFPB lawsuits, and now we learn that two other members were hired despite having ‘disqualifying financial interests’ under federal ethics laws,” Brown said. “It’s more clear than ever that this task force is just another Trump administration effort to gut federal laws and regulations that protect consumers.”