Consumer bureau remains partisan target after Wells Fargo settlement

The Consumer Financial Protection Bureau (CFPB) can’t even levy the largest fine in its history without being dragged into a political morass.

Democrats and Republicans have been fiercely divided over the CFPB since its inception, and the news that the agency slapped Wells Fargo with a massive fine has done nothing to move the needle.

{mosads}For Democrats, the news that a probe by the CFPB and other regulators uncovered widespread fraud at a big bank is proof of the agency’s vital role.

“The #WellsFargo case exemplifies why the #CFPB was born. We must protect this vital agency from lawmakers & lobbyists who want to weaken it,” tweeted Sen. Chuck Schumer (D-N.Y.) earlier this week.

But Republicans are wondering why it took the regulator years to take action.

The CFPB, which opened in 2011, levied its largest ever fine earlier this month, fining Wells Fargo $100 million for opening millions of fake accounts in an effort to hit sales targets and boost business. All told, the bank agreed to pay $185 million in fines to various regulators, including the Office of the Comptroller of the Currency and the City and County of Los Angeles.

Over 5,000 bank employees have been fired as a result of the investigation, which found that as many as 2 million accounts and credit cards may have been opened by Wells Fargo employees with no approval from bank clients. Company CEO John Stumpf has already been excoriated by the Senate Banking Committee and been invited to testify later this month before the House Financial Services Committee.

But at that panel Thursday, there was no sign that Republicans were eager to give the CFPB credit for the major enforcement action.

The CFPB has been a partisan flashpoint since it was created as part of the Dodd-Frank financial reform law. Republicans have repeatedly pushed legislation that would alter its operations and allow Congress greater control over its operations, while Democrats have fiercely resisted those efforts.

Treasury Secretary Jack Lew said Thursday that the actions taken by regulators in the Wells Fargo case proves the need for “tough consumer protection…and for an agency that’s set up in a way that’s workable, which we have now.”

And while Democrats have been eager to seize on the Wells Fargo news tout the CFPB’s work, Republicans are showing no sign that they are convinced.

“This look to me like a case of regulatory incompetence,” said Rep. Andy Barr (R-Ky.) “Far from an argument for enhancing the powers of the CFPB, I think what the Wells Fargo scandal says is that we need to reform the CFPB.”

In the wake of the settlement, Republicans are trying to make the case that rather than it proving the CFPB effectively policed bad behavior at a bank, it shows that the regulator was too slow to take action.

They credit the Los Angeles Times and Los Angeles city attorney with uncovering the scheme, and say the CFPB missed the mark.

Los Angeles filed a lawsuit against the bank in 2015.

Earlier this week, Senate Banking Committee Chairman Richard Shelby (R-Ala.) wondered aloud why federal regulators did not take action until after the city, spurred by a newspaper investigation, had done so.

“If there were ever a textbook case where consumers needed protecting, this was it.  How many millions of unauthorized accounts does it take before the CFPB notices?” he said.

While Republicans are doubting the efficacy of the CFPB, they are pushing proposals to overhaul its operations. House Financial Services Committee Chairman Jeb Hensarling (R-Texas) has authored a bill that would replace the CFPB’s director with a bipartisan commission, subject its budget to congressional appropriations and put other restrictions on its activities.

His committee approved the bill earlier this month with no support from the panel’s Democrats. It is not expected to receive consideration from the full House this year.