Last week the Consumer Financial Protection Bureau, through the power of Dodd-Frank, passed a rule giving the agency unprecedented power to shut down businesses, no matter what the reason, at any time it wishes through a cease-and-desist order. Further, the rule puts businesses at the mercy of the CFPB and they cannot go back into operation until government approval or a court ruling is made over an issue. Subsequently because bureaucratic decisions and court rulings take a substantial amount of time to happen, businesses cannot survive during those waiting periods. Here are the details:
In a notice published in today’s Federal Register, the CFPB has announced that it has adopted its interim final rule on temporary cease-and-desist orders (C&Ds) without change. The final rule takes effect on July 18, 2014.
The CFPB is authorized to issue temporary C&Ds under Section 1053(c) of Dodd-Frank. That provision authorizes a temporary C&D as an adjunct to a cease-and-desist proceeding brought under Section 1053 against a covered person or service provider. A temporary C&D is effective immediately upon service and remains in effect unless modified or terminated administratively by the CFPB or set aside on judicial review.
So they can shut any business down at any time.
(c) SPECIAL RULES FOR TEMPORARY CEASE-AND-DESIST PROCEEDINGS.—
(1) IN GENERAL.—Whenever the Bureau determines that the violation specified in the notice of charges served upon a person, including a service provider, pursuant to subsection (b), or the continuation thereof, is likely to cause the person to be insolvent or otherwise prejudice the interests of consumers before the completion of the proceedings conducted pursuant to subsection (b), the Bureau may issue a temporary order requiring the person to cease and desist from any such violation or practice and to take affirmative action to prevent or remedy such insolvency or other condition pending completion of such proceedings.
Such order may include any requirement authorized under this subtitle. Such order shall become effective upon service upon the person and, unless set aside, limited, or suspended by a court in proceedings authorized by paragraph (2), shall remain effective and enforceable pending the completion of the administrative proceedings pursuant to such notice and until such time as the Bureau shall dismiss the charges specified in such notice, or if a cease-and-desist order is issued against the person, until the effective date of such order.
There’s more, but it’s the same kind of legalese gibberish that basically means if there’s something questioned in a terms of service agreement or contract, a business can be shut down.
Ms. Pavlich points out some more things going on with this:
The new rule comes on the heals of revelations the Department of Justice has been smothering firearms dealerships and other “high risk” entities out of business by “choking” banks and stripping funding through Operation Choke Point.
Consumer groups are pushing back against the rule and issuing a warnings to businesses everywhere about what the rule means for them. The United States Consumer Coalition in particular is sounding the alarm:
“This unprecedented rule created by the CFPB grants the agency unilateral authority to literally shut down any business overnight. It is a doubling down of Operation Choke Point (OCP), the Administration’s program to target lawful industries by intimidating banks from doing business with them. This rule allows the CFPB to immediately issue a cease-and-desist order, which terminates all business practices — and a hearing doesn’t have to be granted for 10 days, effectively shutting down businesses for at least 10 days. This is a ‘guilty until proven innocent’ tactic of the Administration that goes against every historical notion of justice under the law in America.”
The Obama administration, after failing to get gun control passed on Capitol Hill, has resorted to using its executive power to try to put some in the firearms industry out of business, House Republican investigators say.
The assertion is included in a report recently released by California GOP Rep. Darrell Issa, chairman of the House Oversight and Government Reform Committee.
Citing internal Justice Department documents, the committee concluded that the administration used a program known as Operation Choke Point to target legal companies that it finds “objectionable.”
The program was started in 2013 to protect consumers by “choking” alleged fraudsters’ access to the banking system. The Justice Department essentially forces banks and third-party payment processors to stop accepting payments from companies that are considered “high risk” and are supposedly violating federal law.
However, the documents released by Issa’s committee show the federal government lumped the firearms industry in with other “high-risk” businesses including those dealing with pornography, drug paraphernalia, escort services, racist materials, Ponzi schemes and online gambling.
So basically the Orwellian-named Consumer Financial Protection Bureau is going to have the ability to shut down any business, any time, and we’ve already seen this administration using financial schemes to target businesses they find politically undesirable.
But what’s the best part about the Consumer Financial Protection People’s Defense Bureau? They can’t be stopped – they’re funded by the Federal Reserve, and thus can’t even be reigned in by congress defunding them.
Republicans and Democrats on Captiol Hill continue to fight over whether the new Consumer Financial Protection Bureau should be subject to the congressional appropriations process — that is, whether Congress should directly control how much money the fledgling agency can spend each year.
In the meantime, the CFPB funds itself through a bank account at the New York Fed.
Under the Dodd-Frank law, the CFPB gets its money from transfers from the Federal Reserve System, up to specific caps set by the law. The Fed can’t turn down requests under that cap.
The caps are fixed percentages of the Fed’s operating expenses, which works out to the following:
–10% of Fed operating expenses in fiscal 2011 or $498 million
–11% of Fed operating expenses in fiscal 2012 or $547.8 million
–12% in fiscal 2013 or $597.6 million
–12% each fiscal year thereafter, subject to annual adjustments for inflation
So they’re a completely unaccountable, self-funded government group who’ve just made up the rule that they can shut down any business at any time, giving themselves virtually unlimited power to unilaterally destroy any company or enterprise.