Thursday, November 30, 2017

CFPB Collects Fines From Banks And Gives To Left-Wing Activist Groups, After 241 years, the United States experiences its first coup attempt

Holman Jenkins had an excellent editorial at the Wall Street Journal on Wednesday with a timely reminder of the several ways in which the Consumer Financial Protection Bureau, created by Dodd-Frank in 2010, is basically a rogue agency in the U.S. federal government.

The reminder is timely, of course, because of the attempt by the CFPB’s departing director, Richard Cordray, to outmaneuver the president and prevent him from gaining influence over the Bureau’s operations by installing the new chief.

...It’s worth reviewing the basis on which those fines are imposed. Here is Jenkins:
Recall that one of the new agency’s first priorities under Mr. Cordray was to go after auto dealers, though Dodd-Frank explicitly excluded them from the agency’s oversight.

Recall that he sought not to regulate their disclosures but to ban a practice that he and other activists decided they didn’t like, namely dealer-negotiated interest rates on car loans, though the agency had no authority to do so. …

Because he can’t regulate auto dealers, he targeted banks that finance auto dealers. Because auto dealers are forbidden from collecting racial data on borrowers, the upstream lenders can’t know the race of borrowers. Yet Mr. Cordray charged them with disparate impact based on so-called Bayesian Improved Surname Geocoding, which assigns borrowers to a racial category based on their names and zip codes, though the method is not designed for such purposes and known greatly to overestimate the number of African-Americans in the U.S. car-buying population.

Even this does not do justice to the disingenuousness of the agency’s method. Any person identified as having a black-sounding name who paid a higher rate than the average of people with white-sounding names was deemed to have been a victim of discrimination, never mind that many people with white-sounding names also paid a higher rate. …

By such means the agency fabricated—there is no other word—evidence of racial disparity in auto lending to shake money out of lenders, without effective court appeal, because the agency was able to hold necessary approvals the banks sought from other federal agencies hostage until the banks settled.