For the Consumer Financial Protection Bureau, the holiday season has been quite quiet.
On Friday, the federal watchdog The organization that runs Zelle and three of the largest US banks have been charged over their handling of fraud on the popular payment platform.
Monday brought two other major enforcement issues. In the first case, government lawyers accused Walmart of Some gig workers accept payment through expensive, fee-laden deposit accounts managed by a fintech partner. She later filed a lawsuit against Rocket Homes, accusing her of this into its referral network so they can direct customers to their sister lender, Rocket Mortgage.
The lawsuits are just the latest examples of how CFPB Director Rohit Chopra is choosing to push forward in the final days of the Biden administration with aggressive new measures that President-elect Donald Trump’s appointees could roll back — effectively encouraging them to abandon the efforts. . Along with the wave of lawsuits, the agency finalized rules regarding and In recent weeks.
Chopra is widely expected to be replaced by Trump, who has indicated he would leave the agency if asked (and has also said he does not believe his agency should be a “dead fish” in the meantime). Whether the next administration chooses to pursue or withdraw these recent lawsuits, this could be an early test of its approach to consumer protection enforcement, and will be carefully watched by both pro-business groups and progressive activists.
If “these and other cases are dropped, it will be very clear why this happened,” said Robert Weissman, co-director of the left-wing consumer advocacy group Public Citizen. “Big corporations and big donors will get favors from a Trump administration that claims to be on the side of the little people.”
Florida Bankers Association President Kathy Kraninger, who led the CFPB under Trump, called the wave of lawsuits “transparently political” given their timing.
“I would never say they can’t take enforcement action during this transition period,” she said. “But it’s clear that these are issues they’ve been working on for a long time, and when they don’t bring them forward sooner, it becomes clear that this is a political necessity, not about the issue itself.”
Friday’s actions involving Zelle come after years of consumer complaints about fraud on the country’s largest peer-to-peer payment app.
The case targets Early Warning Services, which runs the platform, along with Bank of America, Wells Fargo and JPMorgan Chase, three of the seven banking giants who sit on its board. It alleges that the companies effectively allowed scams to spread on Zelle while ignoring customers who had been scammed or had their accounts hijacked, often advising them to resolve issues with law enforcement or even the scammers themselves. According to the CFPB, customers at the three banks lost $870 million over seven years.
Early warning service The case is “not worth” while figure of $870 million. He said the CFPB’s lawsuit “simultaneously creates and implements entirely new legal requirements” for how financial institutions respond to fraud claims.
Industry groups have echoed this point. In a statement to Yahoo Finance, Consumer Bankers Association President Lindsey Johnson accused the CFPB of trying to use its enforcement powers to effectively create new regulations at the last minute, relying on “clever wordsmithing and salacious headlines.”
But progressive groups say Zell’s lawsuit demonstrated the value of the CFPB at a time when Trump advisers like billionaire Elon Musk were talking about repealing it.
“We are quietly living in a golden age of financial fraud,” said Mark Hayes, a senior policy analyst at Americans for Financial Reform. “Cases like this show that it’s really important to have at least one regulator in Washington whose role is to protect individual consumers.”
Corporate firing – and the next administration
With its lawsuit against Walmart, the CFPB has launched another last-minute attack on the corporate giant. It alleges that the retailer asked gig workers who participated in the Spark Drivers program, which handles last-mile deliveries, to approve payment via accounts managed by Branch Messenger. The lawsuit alleges that the companies opened accounts without authorization, using information such as Social Security numbers they collected.
According to the lawsuit, Walmart and Branch lied about how quickly workers could access their money through the accounts, which lacked basic functions like writing checks, and charged fees for quickly transferring money. The CFPB claims that the branch “raked in more than $10 million in unwanted fees as a result” and that hundreds of thousands of dollars were deposited into accounts that workers never had access to.
In a statement, Walmart called the case “riddled with factual errors” and said the CFPB never gave it a “fair opportunity to present its case during its expedited investigation.”
The Rocket Homes case may be less politically charged; It accuses the company of engaging in “a kickback scheme that discouraged comparison shopping,” Chopra said, in that it gave referrals to real estate agents if they encouraged buyers to use Rocket Mortgage. The company also allegedly told brokers to “preserve and protect their client relationships” by turning them away from other mortgage options. (Rocket Homes called the suit “flimsy” in a statement and noted that a large percentage of its customers chose other lenders.)
While few expect the Trump administration to succeed in shutting down the agency, the Trump administration is generally expected to take a lighter approach to enforcement at the CFPB than the Biden administration. Mick Mulvaney, Trump’s first CFPB director, has slowed new cases to a trickle some and other enforcement efforts against payday lenders that began under his Obama-appointed predecessor, Richard Cordray. Kraninger took a slightly different approach, but often seek to impose relatively small penalties.
Kraninger told Yahoo Finance that while Trump’s next appointee could certainly dismiss some of Chopra’s cases, that may not happen immediately.
“For anyone who cares about the law, you don’t want to return cases willy-nilly, and you don’t want to withdraw cases willy-nilly,” she said. “So it takes time to review cases, and there is a general explanation.”
However, conservative groups are already urging Trump to reverse the CFPB’s latest efforts.
“I can’t speak to the merits of every lawsuit, they file them very quickly,” said John Berlau, director of financial policy at the Competitive Enterprise Institute. “(But) when the Trump administration puts its own person in place, on day one, it must root out and review the bad regulations, of which there are many, but also the harmful and baseless enforcement actions that the previous administration pursued.”
Jordan Weissman is a senior reporter at Yahoo Finance.