Consumer advocates sue CFPB for granting financial services industry illegal influence over consumer protection policy

Secretive taskforce likely to recommend sweeping rollback of consumer protections
Tuesday, June 16, 2020

BOSTON -- Representing the National Association of Consumer Advocates (NACA), U.S. Public Interest Research Group (PIRG) and consumer law expert Professor Kathleen Engel, Democracy Forward sued the Consumer Financial Protection Bureau (CFPB) and Director Kathy Kraninger Tuesday for unlawfully creating and operating the Taskforce on Federal Consumer Financial Law in violation of the Federal Advisory Committee Act (FACA). The Taskforce is stacked with industry-aligned members, excludes consumer advocates, does not serve a public interest, and has conducted its work behind closed doors — all in violation of federal law. This suit seeks to put a halt to the Taskforce’s unlawful operation and stop the CFPB from relying on its work.

"A group of hand-picked industry lawyers and consultants that meets behind closed doors — with no consumer advocates or disparate points of view —  is more appropriately called a Task Farce. But this Task Farce is no joke," said U.S. PIRG Senior Director of Federal Consumer Programs Ed Mierzwinski. "Not only is CFPB breaking the law, their actions continue to be dangerous for consumer protection."

“The Federal Consumer Financial Law Taskforce is the latest effort by a Trump appointee to outsource policymaking to private interests while excluding other voices,” said Democracy Forward Executive Director Anne Harkavy. “We’ve stopped them before, and we’re asking the court to stop them here. In the midst of an economic downturn, the CFPB should not be excluding consumer advocates from key policymaking conversations about how to protect American families.”

“The CFPB's unlawful creation of this Taskforce is just the latest cynical attempt by the agency's leadership to undermine our nation's necessary consumer protections,” said Ira Rheingold, Executive Director for National Association of Consumer Advocates. “Coming at a critical moment in our country when consumers will need more protection, not less, this Taskforce — filled with industry apologists — is the last group of people we should be looking to for consumer protection advice.”

Announced last October, the Taskforce was chartered to “examine ways to harmonize and modernize federal consumer financial laws.” But in selecting the Taskforce membership, the CFPB rejected the applications of many consumer protection experts and advocates, including Suffolk Law Professor Kathleen Engel -- a prominent scholar of consumer law and finance who has sat on the CFPB’s Consumer Advisory Board -- and University of Minnesota Law Professor Prentiss Cox, who was the first chair of the Bureau’s Consumer Advisory Board. After interviewing for a position on the Taskforce, Professor Engel noted that "views on deregulation were a criterion" and decried the "inquisitorial" nature of the interview. Ultimately, the CFPB ended up naming only members with ties to the financial industry while excluding consumer advocates.

“It distresses me that political appointees at the CFPB are willing to defy the law in order to push their deregulatory agenda and undermine the agency’s mission of protecting American families,” said Professor Kathleen Engel.

FACA was designed to prevent special interest groups from exerting undue influence over the Executive Branch. It requires advisory groups that provide recommendations or advice to federal agencies to have balanced membership, be in the public’s interest, and operate transparently. However, the CFPB Taskforce is unlawfully:

  • Chartered. The Bureau has failed to explain why the Taskforce is necessary and not duplicative of existing CFPB expertise.
  • Made up of members who have championed deregulation and exclusively represent the interests of the financial industry. Taskforce Chair Todd Zywicki, for example, has called the CFPB “a tragic failure” and a “menace.”
  • Operating in secret. Facing months of criticism for holding meetings behind closed doors, Taskforce Chair Zywicki announced the Taskforce’s intent to hold one public hearing and one public listening session later this year. However, the announcement does nothing to ensure that all future meetings are open to the public as required by FACA — and it does nothing to undo the damage caused by its earlier closed-door sessions.

The Taskforce is expected to produce final recommendations to Director Kraninger by January 2021. Given the Taskforce members’ industry-aligned views and CFPB’s refusal to include any Taskforce members with divergent perspectives, the report may well recommend measures that would roll back the crucial consumer protection regime put in place after the 2008 financial crisis — all without the transparency, input, and public oversight the law requires.

The Trump administration has made a habit of creating advisory committees across the Executive Branch that “[fly] in the face of FACA.” Stacked with industry representatives, these committees have allowed their members to unlawfully advise agencies on policies that impact millions of people.

Sens. Sherrod Brown and Elizabeth Warren have called on Director Kraninger to suspend the Taskforce until CFPB explains how its members were selected and what purpose it serves.

The suit was filed on June 16, 2020, in the U.S. District Court for the District of Massachusetts. David A. Nicholas, Of Counsel to Wolf Popper LLP, is Massachusetts counsel on the case. Read the full complaint here.