Consumer Financial Protection Bureau Data-Mining Americans' Credit Card Transactions

Consumer Financial Protection Bureau (CFPB) director Richard Cordray and his staff are planning to track four out of five U.S. consumer credit card transactions this year through a controversial new data-mining program.

Richard Pollock of the Washington Examiner reported Friday that a CFPB strategic planning document for fiscal years 2013-2017 discusses a “markets monitoring” program through which officials plan to track 80 percent–up to 42 billion–credit card transactions in 2013 made by Americans.

In addition, the strategic planning document indicates CFPB plans to monitor up to 95 percent of all mortgage transactions.

During a heated House Financial Services Committee hearing held Wednesday, Cordray defended the data-mining practice and said that his agency is currently tracking credit card usage at 110 banks, including Morgan Chase, Bank of America, Capital One, Discover, and American Express.

“This is one step closer to a Big Brother form of government where they know everything about us,” said Rep. Sean Duffy (R-WI).  

The Examiner had earlier reported that bankruptcy experts expressed concern that the independence and impartiality of the U.S. Trustee Program, which is part of the Department of Justice and is the federal government’s administrative agency for handling bankruptcy cases, is being undermined by CFPB practices.

Former chair of the House Financial Services Committee Rep. Spencer Bachus (R-AL) told the Examiner he believes CFPB, which was established by the Dodd-Frank Act, violated at least two federal laws through its use of the Trustee Program to collect bankruptcy data as part of its data-mining practice. Bachus said a key House subcommittee will hold hearings on possible CFPB abuse of the bankruptcy trustee.

The Dodd-Frank Act prohibits the CFPB from gathering personally identifiable financial information on consumers and bans it from regulating practicing attorneys.

According to the Examiner report:

Bachus said Cordray “exceeded his authority” and violated both provisions if he tried to use the trustee program to obtain files from a company that maintains a document archive for thousands of bankruptcy case attorneys.

“He [Cordray] basically said to me, ‘We needed to do this. This was something we thought we ought to do.’ He never said, ‘OK, it probably violates two provisions of the law,’ a very clear ‘Do not do this,’ ” Bachus said.

In addition, Bachus stated CFPB may also have violated the Fourth Amendment of the Constitution which provides Americans freedom from government interference or intrusion in dealing with their legal representation.

“They are challenging through their actions, one of the most basic freedoms guaranteed by our forefathers and that is the right to counsel,” Bachus said. “It’s just nuts.”

During the intense House hearing, Cordray refused to answer questions from committee members about CFPB’s relationship with the Trustee Program.

“We don’t typically comment on the details of enforcement matters,” he said.

Cordray, a former attorney general of Ohio, admitted to “working with a number of different agencies, including the Justice Department, to carry out our responsibilities and we will try to do that.”

According to the Examiner, Cordray and Republican members of the committee exchanged some angry remarks. GOP committee members charged that Cordray and his agency were operating beyond their legal authority and that CFPB practices displayed widespread conflicts of interest and mismanagement.

Only a handful of Democrats attended the hearing, but those who did commended Cordray.

Rep. Maxine Waters (D-CA) praised Cordray for “how well” he had “worked with a lot of stakeholders and [his] careful leadership of this young agency.”

However, the committee chairman, Rep. Jeb Hensarling (R-TX), observed that the CFPB “is designed to operate outside the usual system of checks and balances that applies to every other government agency.”

In addition, Rep. Patrick McHenry (R-NC) noted a “conflict of interest” in a $5 million contract that CFPB had awarded to a company that was co-founded by the head of the bureau’s Office of Research.

But, after Cordray refused to say how many credit cards are being reviewed by his agency, Duffy then flatly confronted him with the question, “Why don’t you just level with us?”

“We’ve been asking these questions over and over and over again,” Duffy asserted. “You come in and stonewall, you try to explain, but never do we get answers. Never does America get answers.”

When Duffy proceeded to compare the CFPB data-mining practice to the National Security Agency’s (NSA) surveillance program, Cordray responded angrily, “There is no comparison between the NSA and the CFPB.”

“The agency has never given us a number of how many Americans have been surveilled,” Duffy countered. “However, we’ve seen in their disclosures they are collecting 80 percent of credit cards in America, 1.16 billion credit cards, which means that they are collecting information on just under a billion credit cards in America. That’s a scary number.”

In early January of 2012, President Obama installed Cordray as CFPB director through a highly controversial recess appointment after Republicans opposed the creation of the agency as well as its funding structure.

“Not only are President Obama’s January 4, 2012 appointments unconstitutional, but the justification for those actions does great violence to the Constitution’s separation of powers and system of checks and balances,” wrote Sen. Mike Lee (R-UT) in a Forbes article.

Obama renominated Cordray in January of this year, stating, “Over the last year, Richard has proved to be a champion of American consumers…Thanks to his leadership, we’ve made it tougher for families to be tricked into mortgages they can’t afford.”

As part of a “deal,” the Senate voted to confirm Cordray in July. Republicans agreed to move forward with seven stalled appointments for the CFPB and other agencies for simple majority votes in exchange for an agreement by Democrats to temporarily abandon a move to change the Senate rules to weaken the minority party’s ability to block nominations.