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Why that Orwellian Anti-CFPB Ad Could Backfire

WASHINGTON — Even before the Republican presidential debate started, it made financial news – not because of what was said, but an ad that ran during the broadcast late Tuesday night.

A group called the American Action Network bought a 30-second spot that portrayed the Consumer Financial Protection Bureau as a Stalinist nightmare, complete with two large red banners portraying its director, Richard Cordray, and its founder, Sen. Elizabeth Warren, D-Mass. In the video, mindless drones in drab clothing mechanically stamp "DENIED" on consumer loans while a narrator describes the agency as "designed to interfere with your personal financial decisions." The ad ends by imploring viewers to "Tell Congress to Stop the CFPB."

While many bankers may cheer the ad's portrayal of the CFPB, its gross mischaracterization of the agency is likely to backfire – and is already helping bankers' greatest foe, Warren, raise money.

Here's how:

1. The ad is over the top, making it easy to knock down

For a political ad, the anti-CFPB spot packs a punch. It's well executed and, by evoking Apple's famous "1984" ad of several decades ago, likely to be very memorable to those who see it. But even the fiercest critics of the CFPB would have to agree it's hyperbolic.

For starters, it portrays consumers waiting in line to have their loan application denied by a CFPB employee. But that's not what the CFPB does. The agency writes rules and takes enforcement actions against firms after the fact; it isn't involved in the day-to-day process of granting loans. That may seem like a minor difference to some banker critics of the agency – after all, writing narrow rules could effectively constrict credit – but it makes it very easy for Warren and the agency's supporters to prove to any worried consumers that the ad is bogus.

2. Consumer credit isn't tighter since the CFPB's creation

Perhaps the biggest problem with the ad is the underlying point it wants to make – the CFPB will deny "that car loan you needed, your mortgage, that personal loan" – isn't backed up by any evidence. Though lenders will often argue it is harder to make loans in the current regulatory environment, credit is still flowing. September had the largest growth rate in consumer credit this year, at a 10% annual growth rate and almost double the 5.6% growth in August, according to the Federal Reserve's most recent consumer credit report.

In fact, the last year that consumer credit declined was in 2010, when the Dodd-Frank Act was signed that created the CFPB. Consumer credit fell 1% that year but has grown every year since and reached 7.5% in the third quarter this year.

3. The ad's sponsor has connections to a company under investigation by the CFPB

As detailed by an article in The Intercept, American Action Network has connections to Navient, a student lender under investigation by the CFPB. Two board members of the conservative group are registered lobbyists for Navient, according to the article, while another board member works for a lobbying firm that serves student and payday lenders.

The CFPB told Navient in August that after a two year investigation it had found sufficient evidence to determine the student lender violated consumer protection laws and may seek to sue it. Navient said the CFPB's potential legal action stems from its late-fee practices and what it described as "other matters."

A spokeswoman for Navient said the company had "zero involvement" in the ads "or any efforts regarding the ads. To imply otherwise is completely false."

[Editor's note: On Thursday, the board members, former Reps. Vin Weber and Thomas Reynolds, issued a public statement saying they were not aware of the ad until "after the ads had been made public."

"Neither of us saw the ad until it ran during the Republican debates," they said. "To be clear, Navient was not involved in any way in this effort."]

4. The ad is very likely to help Warren raise money

Political ads have a way of helping to galvanize the opposition more than enlisting supporters. That could easily be the case here. Before the ad even ran, Warren sent emails to progressive allies alerting them to her portrayal as a "commie dictator." She asked them to help her raise $30,000 – the same amount that she claims American Action Network paid for the ad.

"I'm a big girl, and I can take the personal attacks. But working families who need the CFPB can't – not when they've been crushed, squeezed and hammered by the big banks and their friends in Washington for years," she wrote in the email. "It's up to us to fight back."

If history is any indication, Warren is likely to get far more money than she asked for. At the very least, the ad reinforces Warren's message that the CFPB is under constant GOP attack and must be vigorously defended, making it even less likely other Democrats would be willing to break with her to support a bill that would restructure the agency.

It may ultimately be bad branding for the GOP itself, argued Sheila Bair, the former chairman of the Federal Deposit Insurance Corp.


(5) Comments



Comments (5)
When it comes to criticizing politicians, Senator Warren is apparently like Lord Voldemort to some...she who must not be named.
Posted by mrsmy2cents@gmail.com | Wednesday, November 11 2015 at 4:30PM ET
Has Elizabeth Warren tried to get a mortgage loan lately? The CFPB has added about 15 days to the processing time, added about one inch to the thickness of the file, increased the cost of making the loan about $400 (which is passed on to the consumer)and made even the most seasoned mortgage lenders afraid of fines and penalties for very trivial errors. With help like this, consumers should be longing for the loan sharks to return.
Posted by 191111 | Wednesday, November 11 2015 at 4:05PM ET
While it may be true that 'consumer credit' is up@ at 10% annual growth, that encompasses a whole more than just mortgages. Credit card debt is now almost at a national high in comparison to pre-recession levels and who funds those credit cards? Wow, would that be the banking industry? It would be a whole different story if the CFPB were able to go after the real culprits of wall street and make them pay for the wrongdoing but of course it's the taxpayers who ended up paying the bill. Last night's Repub debate brought out a lot of the dirty laundry that the American public wants to clean. One of them is the CFPB and the Dodd-Frank Act. I think Sen Warren's intentions were on the right track, but even now when she wants to fight back against those who want 'to clean up the CFPB' she's putting herself on the wrong side. This ad may well backfire but for the common everyday viewer/taxpayer/voter it portrays what essentially is the bottom line.
Posted by whatamess | Wednesday, November 11 2015 at 12:10PM ET
Maybe the reason loans are down in Detroit is because people can't afford to take the obligation on. That's the way our credit system it supposed to work. You need to be able to pay it back and if you can't, you're denied a loan. Pretty flipping simple. But the banking industry wants the ability to hand out loans to even those who can't handle them and when those loans go unpaid they look for a government bailout which means the people who are paying their obligations. Why should the banks want a watchdog to keep track of their shady dealings? I know if I were shady I wouldn't want it. For many in America Greed has become the only way of doing business for many financial institutions even at the expense of wrecking peoples lives with loans that should have been denied. Three cheers for Warren and the Consumer Financial Protection Bureau. I'm completely disgusted with the lack of ethics in our countries financial institutions.
Posted by danieljcox | Wednesday, November 11 2015 at 11:16AM ET
The authors need to look behind the government numbers to understand the decline in access to consumer credit. Although total volume is up, it is more concentrated in the wealthy. Look at the number of mortgages issued in Detroit this year, or the number issued nationwide under $100,000.
Posted by david b | Wednesday, November 11 2015 at 8:29AM ET
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