Article

Hudson: My Job Application to Mr. Trump

In response to rumors that President-elect Donald Trump is preparing to oust the Consumer Financial Protection Bureau's director, the magazine’s legal eagle says he’s the right man for the job.

December 2016, F&I and Showroom - WebXclusive

by Thomas B. Hudson, Esq. - Also by this author

In response to rumors that President-elect Donald Trump is preparing to oust the Consumer Financial Protection Bureau's director, the magazine’s legal eagle says he’s the right man for the job. Below is the legal insider’s official application for the post. And if you like what you read, go to www.counselorlibrary.com to check out his just-released book, “The Federal Government’s War on Car Dealer.”

***

Dear Mr. Trump

The Washington rumor mill is in overdrive, and one of the tidbits I picked up is there’s a chance you’ll do your “You’re Fired!” routine with Consumer Financial Protection Bureau (CFPB) Director Richard Cordray. If you do, I’d like to throw my hat in the ring for his job.

In the interest of transparency, though, let me first say that I didn’t vote for you. My friend Terry O’Loughlin (director of compliance for Reynolds and Reynolds) did, though, and actually campaigned for you. That should count for something.

But even if I’m not your biggest fan, I think I have the qualifications for the job. What’s more important, I have a plan. You also like “disruptors” as appointment choices. I think my plan qualifies me as a disruptor.

As for job qualifications, I went to law school, and I have practiced consumer financial services law — that’s what the CFPB does, if you haven’t noticed — since 1973. But a lot of folks have professional credentials as good as mine, or better. My chief qualification is that Mary Ed was my Mama.

Mary Ed didn’t have a lot of formal education — just two years at the sort of Alabama “finishing school” that young girls used to attend to learn how to find husbands. But she had uncommonly good common sense. She cast a wary eye at anyone trying to sell her anything, including financial products. I pity the poor “burial insurance” salesmen who went door-to-door all over the South when they ventured up Mary Ed’s driveway to pitch their wares. Mary Ed would disassemble their lousy policies, explain to them what rotten deals they were offering and send them packing.

That is the gist of what I propose for the CFPB. Mary Ed isn’t with us anymore, so I can’t hire her to lead my team of product reviewers, but I’ll find someone with her eye for detail and nose for flim-flam.

 “Product reviewers?” you ask.

Well, those are the folks who would implement a plan I recommended long ago, as the CFPB was being proposed. The concern after the 2008 mess, you’ll recall, was that creditors had offered financial products with features like variable rates, prepayment penalties, and “hidden” fees and charges that got consumers in trouble. Those pushing for the establishment of the CFPB argued that we needed a powerful new federal agency to protect consumers from these dangers.

“Phooey,” I said. There’s a much better way to protect consumers. Nothing illustrates that more than how we handle car safety. Every year, thousands of folks are killed on our highways. In order to reduce the carnage, we need safer cars. Do we get safer cars by having the federal government dictate car design and oversee every step in assembly? Nope.

What we do instead is take cars off the assembly line, slam them into immovable barriers and rate how well they stand up to the impact. We then assign a rating to each car and require the car’s manufacturer to post the rating on the car’s window. Want a really safe car? Look for five stars. Want a deathtrap? Buy a car with no stars. The manufacturers with safe products will crow about them. Those whose products are not safe will have a difficult sell.

If we use that system to protect lives, why shouldn’t it work to save consumers’ pocketbooks?

So, I’d pink-slip about 1,400 of the Bureau’s 1,600 employees (about half of them lawyers), keeping the 200 smartest and most experienced ones (20 could probably do the job, but remember, we’re talking about the federal government here). I’d have that group (we’ll call them the “Mary Ed Department”) come up with standards for financial products and services, starting with the most common products, including mortgages, credit cards and auto financing. 

The group would create a rating system that financial service providers could use to test their offerings. As an example, a 20% down payment, fully-amortizing first mortgage with a fixed rate, no prepayment penalty and reasonable late charges, grace periods and bounced check fees would earn five stars. A no-down-payment, variable rate balloon mortgage with a teaser rate, packed with gouging late charges and bounced check charges would earn no stars. Armed with the knowledge that one mortgage was safe and the other toxic, consumers would choose the one they wanted.

A few of those 200 folks could also write or amend rules as needed. The current CFPB focuses on enforcement instead of rules, preferring the fuzzy lines and flexibility that enforcement actions provide. Responsible creditors want bright-line rules, so we’ll tell ‘em what’s permitted and what’s not.

I have a couple of other qualifications for the job you might want to consider. I won’t need a big salary because I don’t plan to work very hard. We already have a house in Maryland within commuting distance of the Bureau, so I’ll have no moving expenses. And I like dogs.

So there’s my job application. I can start any time. So c’mon, man, give me a shot. It would make Mary Ed proud.

Tom Hudson is a partner in the law firm of Hudson Cook LLP and one of the industry’s top insiders  and the author of several compliance manuals available at CounselorLibrary.com. Copyright CounselorLibrary.com 2015, all rights reserved. Single publication rights only, to F&I and Showroom. (12/16) HC# 4851-0086-7902 v.1.

Comment

  1. 1. SCOT MILLER [ December 22, 2016 @ 12:32PM ]

    WHY NOT JUST ELIMINATE THE CFPB? THERE IS NOTHING IN THE CONSTITUTION ABOUT THIS FEDERAL AGENCY. EACH STATE HAS ADEQUATE OVERSIGHT CAPABILITIES. IT'S A WASTE OF TAXPAYERS MONEY. WE DON'T NEED MORE LAWYERS IN GOVERNMENT. WE NEED LESS OF THEM. THAT'S WHY WE ARE IN THE SIUTUATION WE ARE IN. LAWYERS MAKING LAWS AND REGULATIONS. SERIOUS CONFLICT OF INTEREST IF YOU ASK ANY OF THAT IN FACT DID SUPPORT TRUMP.

  2. 2. Brian Reed [ December 22, 2016 @ 12:36PM ]

    Tom - You have my vote to applying good common sense policies that are then implemented and managed with common sense. You would be a great Director of the CFPB.

  3. 3. David Ruggles [ December 22, 2016 @ 01:05PM ]

    Well, there is mention in the Constitution about the process that created CFPB. If each state has adequate oversight capabilities, how did the mortgage crisis happen? Unregulated credit default swaps allowed mortgage securitizers to gain the coveted AAA rating. The swaps were similar to insurance. But when Brooksley Born, the head of the commodities and Futures Trading Commission suggested CDS issuers reserve capital to pay potential claims, all hell broke loose. Alan Greenspan, Arthur Leavitt, Phil Gramm, and other RW ideologues attacked Born and arranged for her to be "broomed." After all, it is much more fun to pay huge bonuses and dividends than to reserve capital to pay potential claims, right? And everything won't go bad at once, right? This happened during the Clinton Administration. During the Bush 43 administration, they gutted the SEC just when we needed it the most. Fast forward a few years and the Republicans have succeeded in rolling back the "firewall" that was built into Dodd Frank so Wall Street can again gamble with your money and mine, while taking us all hostage.

    That said, it is going to be hard to get rid of the CFPB just after it nailed Wells Fargo for it grievous sins to the tune of $150 million. Does anyone in their right mind want the kind of stuff Wells was doing taking place. Does anyone want insurance companies who don't reserve capital to pay claims? Does any right minded person want ideologues who think markets self regulate to be able to defund needed regulators? If you want your trips to the grocery store to take on a new level of intrigue, get rid of the FDA. and see where that gets us.

    Having said all of this, BISG and "disparate impact" discrimination is an abomination. CFPB has, at times, behaved like a rogue agency who sees discrimination behind every tree. It has done a lot of good. But it still needs to be fixed. Tom, you have my vote. But if I had a magic wand, you'd replace Trump in the morning.

  4. 4. Joe Lawyer [ December 23, 2016 @ 09:13AM ]

    Scott Miller. Why are you so angry bro? Try typing like a normal human being and also be less of an idiot. Not because you voted for Trump - ok, that's part of it - but because an untrained chimp knows more about the Constitution than you do. Each state has "adequate oversight capabilities" - *cough* bullshit *cough* And please ask the taxpayers that got bent over when the big banks were doling out subprime mortgages like candy and millions lost their homes, retirement, and had their credit destroyed. The same taxpayers who were then bent over again to bail out the banks that screwed them in the first place. Ask those taxpayers if they mind chipping in to avoid another dry humping from Wall St. In a country where the average taxpayer has the brain power of the aforementioned untrained chimp and the attention span of a squirrel with ADD on cocaine, these people need all the protection they can get. The states have adequate oversight capabilities. ..you're hilarious

  5. 5. Steve [ December 27, 2016 @ 07:05AM ]

    Tom, that article is absolutely brilliant. Thanks so much for writing it.

  6. 6. S. Allen Monello [ December 28, 2016 @ 11:10AM ]

    Great article Tom. I thoroughly enjoyed it. Thanks!

  7. 7. David Blassingame [ December 28, 2016 @ 01:14PM ]

    Great piece Tom. Here's another lawyer's article about his experience while working for the CFPB.
    http://www.nationalreview.com/article/443227/consumer-financial-protection-bureau-tragic-failures

  8. 8. DAVE WEAD [ January 07, 2017 @ 08:04AM ]

    THE CFPB HAS BEEN HORRIBLE FOR CONSUMERS THEY HAVE NO IDEA HOW THEY COST PEOPLE MONEY. I WORK IN THE AUTO INDUSTRY AND IF CORDRAY HAS HIS WAY PEOPLE WOULD PAY MORE IN THE END. I CAN TELL YOU PEOPLE GET A BETTER DEAL ON FINANCING IN THE DEALERSHIP THAN GOING TO THERE OWN BANK IN MOST CASES THE RATE IS LOWER BECAUSE WE DEAL IN VOLUME AND CAN PASS THE SAVINGS ON TO THE CONSUMER

  9. 9. Greg [ January 14, 2017 @ 08:43AM ]

    Tom, YOU get it and have my vote!!

  10. 10. Carroll Carter [ January 16, 2017 @ 06:20AM ]

    You are 100% correct! I have been through the CFPB process and it is a JOKE. The have no idea how auto finance woks and used flawed methods to prove an incorrect premise. Their settlements solved nothing as their was no discrimination to begin with.

 

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