Whistleblowers Needed Now More than Ever as Federal Oversight Rolls Back


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The federal government plays many roles. One of them is enforcing consumer protection laws, which should prevent consumers from being ripped off. If there are violations, those responsible can be held accountable. What happens when the federal government loses interest in protecting consumers and would rather protect businesses that prey on them? We’re going to find out.

One agency charged with protecting consumers is the Consumer Financial Protection Bureau (CFPB). Its new director, Mick Mulvaney, announced in February a less aggressive regulatory mission for the supposed watchdog agency. It claims the agency will enforce consumer protections but not go beyond its mandate under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).
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The law was passed after abuses by financial institutions helped plunge the country into a recession in 2008.

CFPB’s Focus on More Help for the Financial Industry, Less for Consumers

The agency’s new mission statement states that the CFPB’s main goals are to “ensure that all consumers have access” to consumer financial products and services and to “implement and enforce the law consistently” to ensure that markets “are fair, transparent, and competitive.” It also states that the agency will focus on protecting the legal rights of the financial companies it regulates and will write new rules to address what it sees as unwarranted regulatory burdens.

This consumer protection agency is now dedicated to protecting the legal rights of financial institutions it oversees. Will it make sure these corporate foxes have easy and equal access to the henhouse where consumers live and do business?

This is a sharply different direction from the aggressive consumer protection policies by the CFPB’s first director, Richard Cordray. While he led the agency it focused on financial services companies that it believed were misleading or cheating consumers, often obtaining fines and other punitive measures. Thanks to CFPB’s efforts, more than $12 billion was returned to consumers who were wronged by businesses accused of fraud and illegal activities.

Bureau Formed to Prevent Fraud. What Will it Do Now?

CFPB was created by Congress because the last economic crisis exposed the fact that consumers need an independent, federal watchdog to protect them from questionable financial practices. If the CFPB was a consumer watchdog before, will it now be caged while consumers are freely exploited by the financial industry? The agency’s new mission statement makes no reference to law enforcement and emphasizes making life easier for banks, not consumers.

No one was happier with change than the financial services industry. It pushed for curbing the agency because they felt it overstepped its bounds, tying up the industry with rules that were difficult and expensive to follow. Those costs, claim the industry, were passed onto consumers.

Since Mulvaney took over in November, the CFPB has made a number of changes that negatively impact consumers, including:

• Members of the agency’s Office of Fair Lending and Equal Opportunity were transferred to Mulvaney’s office. These employees who specialized in fair lending laws are now generalists dealing with a wide range of consumer issues.

• CFPB pushed back the implementation of a prepaid card rule, which was first proposed six years ago and finalized in 2016. It’s intended to protect the millions of people who use prepaid cards instead of debit cards tied to traditional bank checking accounts. It also limits the liability of consumers when the cards are used for unauthorized transactions or fraud.

• The bureau delayed a payday lending rule meant to protect consumers who use high-cost payday, installment and auto title loans. CFPB also withdrew a lawsuit against Golden Valley Lending, a payday lender that charged customers interest rates of more than 900%.

• President Trump signed a joint Congressional resolution in November ending the Arbitration Agreements Rule, which had been created by the CFPB. It allowed financial services companies to be subject to class action lawsuits. It would have prevented banks, credit card companies and other financial services companies from including clauses in account holder agreements denying consumers the ability to band together to sue in court when the terms of the agreement or laws are broken. Class action lawsuits can be critical to ensuring that financial companies obey the laws. Though violations may not cost individuals much, they add up when hundreds or thousands of consumers are affected.

With CFPB Losing Interest in Consumers, Will Others Fill the Breach to Protect Them?

How much damage CFPB’s retreat will ultimately do remains to be seen. State consumer protection agencies and state attorneys general may be able to partially fill the void, but their jurisdictions are only within the boundaries of their states, not the entire nation. Other federal agencies, such as the Federal Trade Commission, could also become more active, but ultimately the federal government is led by a President more interested in protecting businesses than consumers.

Another group of people could help consumers while the CFPB loses interest in them. A section of Dodd-Frank establishes the rights of whistleblowers (those who work for or with financial institutions who report wrongdoing to government agencies) who inform the federal Securities and Exchange Commission (SEC) of legal violations. If there’s a successful enforcement action resulting in sanctions of more than $1 million, the SEC pays awards to whistleblowers who are eligible.

Dodd-Frank also prohibits retaliation by employers against whistleblowers and provides them with the ability to file a private lawsuit in case they’re fired or discriminated against by their employers.

Employees of financial institutions who see illegal and unethical practices that harm consumers can step up and do the right thing. Information can be passed to federal and state law enforcement agencies so violations of the law can be enforced, not overlooked as the CFPB appears to be willing to do. These people risk their jobs and careers to help consumers at a time when the CFPB may be seeing them as potential revenue generators for the financial industry, not people who should be protected by the law.

ABOUT THE AUTHOR: Bert Louthian
For over thirty years, Bert Louthian has been practicing law in Columbia, South Carolina, alongside his father, Herb, providing clients with a collective 80 years of legal experience. Family has always been a top priority for Bert, who, along with his wife, is the proud parent of three lovely children.

Since receiving his Juris Doctor from the University of South Carolina, Bert has been dedicated to helping those who have been wronged or have witnessed wrongdoing so they can come forward safe in the knowledge that they will be provided the best representation possible.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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