Seyfarth Shaw Partner David Bizar on the Battle over the CFPB

David Bizar is partner at Seyfarth Shaw and chairs the firm’s Consumer Financial Services Litigation practice group.

David Bizar
Seyfarth Shaw

Bizar represents lenders defending lawsuits against borrowers.

But it’s not just run of the mill lawsuits.

Bizar is what is known as escalation counsel. A case might be escalated to Bizar if it poses a systemic threat to the firm’s business – if a lender would be found liable, then it could trigger system wide liability. It could trigger a case being brought by the Consumer Financial Protection Bureau (CFPB), any of the Attorneys General, or the Federal Trade Commission (FTC)

Bizar is one of maybe fifty lawyers in the country who have such a practice.

And Bizar says that the country would be better off without the CFPB.

(Seyfarth Shaw represents the Trump Organization, Trump for America and Trump for President. The firm says it does not currently represent anyone in the Trump administration.)

What specifically is your beef with the agency?

“The CFPB is tyrannical,” Bizar told Corporate Crime Reporter in an interview last week. “The CFPB was designed to be able to coerce financial institutions into following wherever it wants them to go. When Richard Cordray was director of the CFPB, he wielded unprecedented authority — more authority than even the President of the United States. And that’s not my view. That is the view of the D.C. Court of Appeals in the PHH case.”

“The CFPB is completely unaccountable to the democratic electorate, except after five years when the term of the director expires.”

They write the rules, interpret the rules, they have the power to adjudicate the case. In the PHH case they overruled a judge’s opinion about what the law was — to the point where Cordray increased the fine from something like $6 million to $109 million. They are an executive branch agency but they don’t report to the executive.”

How is that different from every other regulatory agency?

“There are two types of regulatory agencies — agencies headed by commissions and agencies headed by directors. Agencies headed by commissions have historically been expert agencies. Those folks are bipartisan. The commission structure diffuses the ability of one person to have absolute control. There are also directorships, but historically those directors are removable at the will of the president so that you don’t have to have a cause for removal. They report to the President, they serve at the pleasure of the President and therefore they are accountable.”

What do you make of the current battle to succeed Cordray?

“Trump clearly has the upper hand in that dispute. Both the Department of Justice and the general counsel of the CFPB have come out with formal written opinions that Trump is lawfully entitled to appoint Mick Mulvaney as the successor to Cordray. We will probably get a decision on the lawsuit soon.”

The lawsuit was brought by Leandra English who Cordray appointed as his successor.

“It’s a little more complicated than that. Richard Cordray, on his last day in office, appointed her deputy director. Before Friday, she did not hold that title. He appointed her deputy director for the sole purpose of attempting to install her as his heir apparent. He did so shortly before President Trump nominated Mick Mulvaney as acting director. There is nothing improper about what Cordray did, from a legal perspective. He had a right to appoint someone deputy. That person would have served as the acting director of the CFPB had President Trump not issued his own appointment under the Vacancies Reform Act (VRA).”

“Why will President Trump likely win this lawsuit? Because the VRA gives the default appointment option to the President of the United States – unless there is another statute that mandates a different succession. Deandra English and several Democrats argue that Dodd-Frank does exactly that. It has a provision that says that in the absence of the director, the deputy director shall become the acting director.”

“The problem with that position is that the way in which the VRA has historically been read by the courts is that unless the other statute specifically prohibits the President from making the appointment, the two co-exist. The President can make the appointment under the VRA. Or the President can allow the default provision that exists to function. But ultimately, it’s up to the President.”

“There was a hearing on Sunday before the judge – who by the way is a Trump appointee. He has been on the bench only a short period of time. All of the papers have been filed as of this morning. The judge will likely rule today or tomorrow.” [In fact, the soon after the interview with Bizar, Judge Timothy Kelly ruled that he will not issue an emergency order blocking Trump from installing Mulvaney in the post.]

And then appeals?

“There is a lot of legal wrangling to go. Whoever wins, this case has a lot of legs left in it.”

Mulvaney says – I’m not going to set the place on fire. But if it were up to him — and if it were up to you — this agency would never have been created, correct?

“Yes. I have heard quite a bit of Mr. Mulvaney’s public commentary, including the interview he gave yesterday on Fox News. He said — he’s an official of the executive branch. He’s not there to lock the doors or burn the place down. It’s going to continue to function appropriately. But folks shouldn’t expect that it’s going to be run the same way under the Trump administration that it was run under the Obama administration. They have very different perspectives.”

“As far as my personal opinion, the biggest problem I have with the CFPB is its charter. It doesn’t make any sense to me. I have represented U.S. service members overseas who had debt problems before I ever became a lender’s counsel. I know what it is like to be on both sides of these issues. I have spent a good part of my life outside of my job doing public service for military veterans with debt problems. I’m not just an industry guy. I do believe the Republican position and platform that the CFPB, while well intentioned, does harm consumers frequently.”

More often than not?

“I’m not a statistician.”

What is a harm that sticks out in your mind?

“There have been issues with access to credit. Folks who oftentimes have the most problems with credit are in the most need of it. If you have all of the money in the world and a perfect credit history, you don’t need all of the credit you have access to. It might make your life a little better, but you are not living in desperation.”

How does the CFPB limit access to credit?

“By restricting the types of products that lenders can offer in the marketplace.”

What would be an example of that?

“Payday loans. The CFPB has new rules governing payday lenders.”

Do you have payday lender clients?

“Presently I don’t. In the past, I have had payday lender clients. As I sit here right now, no.”

“What the payday lending industry says is these new rules that require them to determine someone’s ability to repay the loan and restrict how many times you can continue to give someone a payday loan is destroying their business and making it impossible for them to function.”

You say you are not just an industry lawyer, but you have been for a number of years now.

“My workday is for institutional lender clients. But much of my pro bono service has been for individuals, usually service members, who need legal assistance, often with debts.”

How big is the bar of corporate defense attorneys doing your kind of work in the financial services industry?

“It depends on the stakes. There are only a handful of people who do what I do. The stakes are enormous. It’s not an area to dabble in. You have to understand the full regulatory backdrop that these institutions operate in and not just the specific claim.”

What about the CFPB bar?

“There are a handful of firms that have significant CFPB practices. The firm with the most CFPB work is Ballard Spahr.”

How big is the bar of lawyers that practice the kind of practice that you have?

“Fifty people with credible practices.”

You think that this industry could be well regulated without the CFPB?

“I do think that. The problem with the charter of the CFPB is that it is entirely focused on consumer protection to the exclusion of safety, soundness and fitness of the financial institutions that it regulates. While safety and soundness is a backdrop concern, it’s not really an enumerated concern.”

“When Congress formed the CFPB, they said they didn’t like the fact that the historical regulators — the Office of the Comptroller of the Currency for the national associations, the Office of Thrift Supervision for federal savings associations and thrifts — they had dual missions. They were responsible for protecting consumers. But they were also responsible for insuring the safety, soundness and fitness of the financial institutions they were regulating.”

“When Congress created the CFPB, they decided that they did not want that kind of dual mission. They wanted the CFPB to protect consumers. And that’s all well and good if they were not the primary regulator of these financial institutions.”

“But you now have the primary regulator of financial institutions whose mission it is to look out for their customers above all else. There is no other business that is operated or regulated that way ever in the history of this country.”

What about the National Highway Traffic Safety Administration? Its sole mission is to protect the occupant from death and injury. They don’t look out for the safety and soundness of General Motors.

“But financial services companies are regulated substantively. These regulations tell them how to conduct every aspect of their business. What they can sell and what they can’t sell. How they have to disclose it. What it looks like. The entire marketplace has been defined by the CFPB.”

“The CFPB controls credit reporting on the Fair Credit Reporting Act. It controls real estate settlement procedures under the Real Estate Settlement Procedures Act. It controls truth in lending under the Truth in Lending Act. It controls a dozen federal statutes. All with the express mission of protecting the consumer only.” If not the CFPB, who would enforce those laws?

“Prior to the CFPB, they were enforced by the FTC in many instances. There is an old joke – the FTC is now responsible for the one thing the CFPB didn’t get – car dealers. But up until the CFPB, the FTC was in control of the land when it came to consumer protection.”

Are you saying that the CFPB has too broad a jurisdiction?

“No. It has too much power concentrated in one person. My concern is that of the Consumer Bankers Association and the other lender organizations. There is too much power in one person.”

“If it were up to me, the CFPB wouldn’t exist. I have worked under the old regime and under the new regime. I thought it functioned well before the CFPB. I understand why the CFPB was created. But the immense power of the federal government needs checks and balances. The framers of the Constitution were wise to create a government that has the capacity to be at war with itself.”

[For the complete q/a format Interview with David Bizar, 31 Corporate Crime Reporter 47(11), Monday December 4, 2017, print edition only.]


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