Is the CFPB Out of Control?

So a couple of weeks ago, we did a show about how the CFPB used a site to use names, to determine the race of a borrower.  If you recall, 2 out of 3 of our test subjects came out with the wrong race.  I, Brian Stevens, was the only correct conclusion.  

We use our show, The National Real Estate Post, to point out the absurdity of the lending ecosystem.  The problem is, because we use humor as our conduit, we’re not often taken seriously.  However, when you consider the point that the CFPB uses a site, with an algorithm, to determine a consumer’s race; it’s not funny.  Further, when you consider that the CFPB, a government agency, then uses that information to slander and sue lenders, it becomes less funny. Finally when you consider the fact that a government agency, who uses flawed racially bias information to slander and sue lenders, then tries to hide that information, we’ve got problems that make Donald Trump’s bullshit look like a playground prank.  Yet here we are.  

So the problem is, the CFPB operates as “judge, jury, and executioner” over those they regulate.  For example; did you know the CFPB operates outside of congress, unaccountable to the judicial system, and off the books of taxpayers.  Honestly, the CFPB is not part of the annual budget determined by congress.  They are funded by the Federal Reserve, which means they can receive as little or as much money as they choose.  That must be nice.  

Did you know when the CFPB chooses to seemingly and ambiguously sue a lender, they use predetermined administrative law judges?  In the past, they use judges from the SEC. So in the past, the CFPB gets to pick the judge on the cases they bring against lenders.   How is a government agency allowed to operate under these rules?  Short answer is “you’re not accountable to anyone.” This should infuriate you.  

Good news is, the CFPB is no longer using SEC admin judges.  The bad news is, they have white page job postings looking for their own judges.  In an article by Ballard Spahr, who are probably the best CFPB law minds in the country, posted an article on July 20, that goes as follows:

The CFPB recently posted a job opening for an administrative law judge (ALJ).  According to the government jobs website, the position is closed which suggests that it has been filled.  A recent Politico article indicated that the CFPB posted the opening because it has ended its arrangement with the SEC to borrow ALJs.

OK so it’s time to insert outrage here.  In case you missed it, the CFPB has a posting, on a government site, looking for judges to hire.  To hire to work as the unbiased voice of reason to settle cases the CFPB has brought and will continue to bring against lenders.  How can this happen?  

Fast forward.  It has now been proven that the CFPB has been using an algorithm to determine someone’s race based exclusively on their name.  I proved this absurdity a month ago on my show “The National Real Estate Post,” and I’ll prove it again.  I’m going to ask the first person I see their name, race, and identity.  Here it goes.  

That’s Andrew Strah, he’s a 20 something “tech support” at listing booster.  After our short video clip he went back to his computer and “googled” his name.  After all he was a little perplexed about the nature of my questions and wanted to find the answer to a question he never really considered.  It turns out his name is Greek/Italian.  His last name is Slavonian, which makes this Black/White kid Russian; according to him.  How is it fair for the CFPB to use any system to determine anyone’s race when such issues are personal and complicated.  

Yet this is the system the CFPB is using to pigeon hole guys like Andrew, and then bring lawsuits against lenders for being racist.  If ever there was a system that made no sense this is it.  Again, insert outrage here.  

An agency with an unlimited budget, off the books, and unaccountable to the taxpayer.  The very people they are protecting, while buying judges to bring lawsuits against people, with a protocol that makes no sense.  Yet this is the system that allows the CFPB to force companies like Hudson City Savings and loan to pay 27 Million for Redlining for which they were not guilty.  Insert outrage here.  

Now the best part of the story.  The CFPB knew that their information was bullshit.  In an article from Right Side News.  

Much like using a “ready-fire-aim” approach to shooting at targets, the Consumer Financial Protection Bureau (CFPB) appears to have conducted in racial discrimination witch hunt against auto lenders in this same manner. The CFPB investigated and sought racial discrimination charges against auto lenders, as it turns out, on the basis of guessing the race and ethnicity of borrowers based on their last names, and using this “evidence” to prove their allegations. Only 54 percent of those identified as African-American by this “proxy methodology,” the Wall Street Journal reported, were actually African-Americans. The CFPB drafted rules to solve a problem they only believed existed, racial discrimination in auto lending.


The Republican staff of the House Financial Services Committee has released a trove of documents showing that bureau officials knew their information was flawed and even deliberated on ways to prevent people outside the bureau from learning how flawed it was.

The bureau has been guessing the race and ethnicity of car-loan borrowers based on their last names and addresses—and then suing banks whenever it looks like the people the government guesses are white seem to be getting a better deal than the people it guesses are minorities. This largely fact-free prosecutorial method is the reason a bipartisan House super majority recently voted to roll back the bureau’s auto-loan rules.

And we wonder why lenders don’t trust and will not approach the CFPB.  They are crooked and untouchable and now we know that they know it.  

Strangely, I think the solution is not as severe as my opinion in this article would suggest.   I believe lending needs an agency.  I think the CFPB is the answer.  Further, I think every lender in the country agrees.  The problem is that we have the wrong CFPB.  It cannot be built on lies.  It cannot view lenders as the problem. It cannot be unaccountable to congress. It cannot be off the books of the taxpayers. 

The CFPB needs to view lenders as its partners.  It needs to enforce rules and violations where they truly exist.  It need to have more than one voice in rule making.  It needs to make its direction clearly stated and understandable.  Finally, it needs to work toward consumer protection.

Source: National Real Estate Post