Credit reporting agency Equifax in September revealed that a data breach had left the information of 145 million customers exposed. The company waited weeks before disclosing the incident to the public, during which time three executives sold nearly $2 million worth of the company’s shares.
Not even six months later, the Consumer Financial Protection Bureau, under interim director Mick Mulvaney, is scaling back an investigation into what happened, according to a new report. It’s the latest example of how the CFPB, which was created under the Obama administration to look out for consumers in the financial products and services space, is stepping back from that under Trump.
Reuters reported on Monday that Mulvaney, who President Donald Trump in November tapped to temporarily head the CFPB after Director Richard Cordray stepped down, has pulled back from a full-scale probe into how Equifax failed to protect customer data. Sources told the publication that Mulvaney has not ordered subpoenas against Equifax or sought sworn testimony from executives, which it would be expected to do in a full-scale probe. It has put a pause on plans for tests of Equifax’s data protection practices and turned down offers from other federal regulators for help in on-site credit bureau exams.
To be sure, the CFPB is not permitted to acknowledge an open investigation, but one was reportedly opened under Cordray. “The bureau has the desire, expertise, and know-how in-house to vigorously pursue hypothetical matters such as these,” agency spokesman John Czwartacki told Reuters.
A CFPB spokesperson said in an email to Vox that the bureau is authorized to take “supervisory and enforcement action against certain institutions engaged in unfair, deceptive, or abusive acts or practices, or that otherwise violate federal consumer financial laws,” including the failure of institutions to engage in “reasonable data security practices” in connection with consumer report information. “As noted previously, the bureau is looking into Equifax’s data breach and response,” the spokesperson said. “Reports to the contrary are incorrect. The bureau cannot comment further at this time.”
Americans “deserve an explanation” from Mulvaney if the Reuters report is indeed true, said Yana Miles, senior legislative counsel at the Center for Responsible Lending, in an emailed statement. “The public deserves to have a consumer protection watchdog that’s going to keep financial companies and institutions accountable and transparent to the public,” she said. “This is even more the case with credit bureaus, which have immense power over our financial lives.”
Just because the CFPB may be scaling back its probe doesn’t mean Equifax will escape scrutiny entirely. As Reuters notes, Equifax has said it is under investigation by every state attorney general and faces more than 240 class action lawsuits. The Federal Trade Commission is examining the breach as well.
“As previously disclosed, Equifax is cooperating with agencies that are investigating or otherwise seeking information about the cybersecurity incident, including the CFPB. We will not otherwise comment on an ongoing process,” an Equifax spokesperson said in an email.
A refresher on the Equifax breach: it was bad
Equifax in September announced that 143 million of its US-based users — about half of all of the people in the country — had their personal information compromised from mid-May through July 2017, including Social Security numbers, birthdates, addresses, and other data. (Equifax later revised up its number of consumers affected to 145.5 million.) The company waited about six weeks between discovering the data breach and publicly announcing it.
After it first announced the data breach, Equifax offered customers affected free credit monitoring and identity protection services — as long as they agreed to a forced arbitration clause that barred them from joining forces with other wronged customers to sue the company. After a backlash, the company dropped the forced arbitration clause.
Equifax CEO Richard Smith in late September stepped down. In October, he testifiedbefore the Senate Banking Committee and faced questions about Equifax’s handling of consumer data and the breach, executive stock sales, and broader issues pertaining to credit bureaus such as Equifax, TransUnion, and Experian, which handle the personal information of millions of consumers. (Credit bureaus are partly regulated by multiple agencies.) “Equifax and this whole industry should be completely transformed,” Sen. Elizabeth Warren (D-MA) said during the hearing. “We’ve got to change this industry before more people are injured.”
This is just the latest example of the CFPB’s changing mission
Mulvaney, who is director of the Office of Management and Budget, has been pretty aggressive at the CFPB since President Trump tapped him as interim director in November. He has revised the bureau’s mission statement, adding in a line about “regularly identifying and addressing outdated, unnecessary, or unduly burdensome regulations” and another about “consistently enforcing” consumer financial law.
Under Mulvaney, the bureau hasn’t announced any new enforcement actions. It has announced plans to reconsider a rule that would have imposed restrictions on payday and short-term lenders, such as making sure borrowers would be able to pay them back, and delayed a rule on prepaid cards that increased consumer protections. It dropped an investigation into World Acceptance Corporation, an installment lender that was accused of trying to profit from repeat borrowers. Mulvaney also declined to request any funding for the CFPB this quarter.
“In a very few number of days, the acting director has done a great deal of damage,” Aaron Klein, fellow in economic studies at the Brookings Institution and former Treasury Department aide, recently told me. “What seems to be happening at the CFPB is kind of a reflexive, anti-whatever the last guy did approach.”
Beyond the policy and enforcement measures, some of what Mulvaney has done at the CFPB has been symbolic, and verging on petty. In December, the CFPB renamed a fellowship program for law students and recent graduates that had honored Supreme Court Justice Louis Brandeis, who was known in the early 20th century as the “people’s lawyer” for taking on major moneyed interests, including JP Morgan’s railroad monopoly.
The fellowship is now named after Joseph Story, a 19th century Supreme Court justice known for his defense of property rights and economic liberty. Story was a staunch opponent of President Andrew Jackson, of whom Trump is a professed fan, so it’s not clear exactly what Mulvaney was going for in all of this. Carter Dougherty, communications director of Americans for Financial Reform, noted as much on Twitter.
— Carter Dougherty (@CarterD) January 2, 2018
Trump has not yet indicated who he might nominate as permanent director of the CFPB, but in the interim, Mulvaney seems determined to do quite a bit of damage. “It’s discouraging to see that every week Mulvaney is finding new ways to sabotage the consumer bureau,” Miles, from the Center for Responsible Lending, said.