Sunday, November 19, 2017
Politics

PunditFact: Townhall editor wrongly claims U.S. agency can shut down a business for any reason

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The statement

The Consumer Financial Protection Bureau "passed a rule giving the agency unprecedented power to shut down businesses, no matter what the reason, at any time it wishes."

Conservative journalist Katie Pavlich Weinstein, on Townhall.com

The ruling

Don't feel too bad if you've never heard of the Consumer Financial Protection Bureau. It's the new kid in Washington, as far as government agencies go, created by the passage of the 2010 massive financial regulation overhaul known as Dodd-Frank.

The bureau, which opened in 2011, has rulemaking powers, supervises certain financial institutions and checks out complaints from consumers about lending practices that may violate the law.

An editor of the conservative news website Townhall claimed it has more nefarious aims.

A reader asked us to look into the thrust of a story by news editor Katie Pavlich, also a Fox News contributor, who said the agency granted itself authority to shut down businesses for basically any reason.

"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," Pavlich wrote.

We tried to reach Pavlich through email and Twitter, but she did not respond. Her article links to a post on CFPB Monitor, a blog maintained by the Ballard Spahr law firm, about the agency adopting a final rule on temporary cease-and-desist orders.

Just one problem: The cease-and-desist order isn't what Pavlich thinks it is.

One of Ballard Spahr's attorneys told us the rule Pavlich referenced is not meant to gut businesses' rights.

"It's not like a blank check to put somebody out of business," said Christopher Willis, a Ballard Spahr partner and consumer finance attorney who represents financial institutions that would be subject to the rule. "It's supposed to be tied to stopping someone from violating the law."

Here's how Willis explained it to us: When the agency thinks a business has broken the law, the agency can file a lawsuit, pursue administrative proceedings or do a cease-and-desist order. But a cease-and-desist order is to cease-and-desist violating the law — not to stop existing.

Moreover, the agency didn't give itself the power to issue cease-and-desist orders, Congress did. Section 1053(c) of the Dodd–Frank Wall Street Reform and Consumer Protection Act allows the Consumer Financial Protection Bureau to conduct cease-and-desist proceedings.

So, in September 2013, the agency developed an interim rule that spells out how to do what Congress wanted. Essentially, the rule says the agency's director may issue a temporary cease-and-desist order when he or she finds a company's alleged unlawful action will render it unable to pay debts or "otherwise prejudice the interests of consumers."

An earlier CFPB Monitor post equated this kind of order with a temporary restraining order in a judicial proceeding. The order is enforceable once served.

Is the cease-and-desist authority unprecedented? Not really. Other banking agencies have had this power for a long time.

Agency spokesman Samuel Gilford sent us an alphabet soup of federal financial regulators with similar power, including the Federal Deposit Insurance Corporation, Securities and Exchange Commission, Federal Reserve, OCC and Financial Industry Regulatory Authority, as well as many state banking regulators.

Pavlich's claim rates Pants on Fire.

Katie Sanders, Times staff writer

Edited for print. Read the full version at PunditFact.com.

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