The Dubious Grassroots and Coalition Credentials of an 501(c)(4) Attacking Dodd-Frank

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July 20, 2015; The Hill

This week is not only the 25th anniversary of the Americans with Disabilities Act, but also the fifth anniversary of Dodd-Frank, the Wall Street Reform and Consumer Protection Act. One of Dodd-Frank’s most significant creations was the Consumer Financial Protection Bureau, meant to oversee consumer protection in the financial sector. President Obama originally wanted to appoint Elizabeth Warren to head the Bureau, but Republicans and bankers stymied the appointment, leading her to opt for a successful senatorial run, in the process causing banks more heartburn in the Senate than she ever could have done at the CFPB.

But how times have changed! Due to relentless criticisms from Dodd-Frank opponents and the often-lackluster responses of Democrats in Congress, the latter well funded by the financial sector in political campaigns, it appears that much of the public has lost track of the importance of Dodd-Frank to rein in out-of-control bankers. The long congressional stalemate with the White House over the leadership of the CFPB was just one instance, though a powerful example, of how little enthusiasm there was in Congress to give Dodd-Frank’s Bureau teeth. As a result, even with the banking sector’s influence over the Bureau, the fifth anniversary of Dodd-Frank has been greeted by more calls than ever for the modification (at a minimum) of the law.

For example, Brian Wise of the United States Consumer Coalition writes in The Hill, “Dodd-Frank has ended up contributing to an unprecedented interference in the free market and reductions in personal privacy and consumer freedom—more than any other single piece of legislation” and “The law’s most significant achievement—the creation of the Consumer Financial Protection Bureau (CFPB)—has become the poster child for nanny state government, domestic spying and a lack of transparency and accountability that’s nothing to celebrate.”

Don’t know this Consumer Coalition? You’re not alone. Its website provides nothing on who the leaders, sponsors, and funders of the coalition are, though it portrays itself on its homepage as a “grassroots organization.” The grass is hard to see in this organization, as it exists as the creation of an anonymous donor who hired Wise’s firm, Wise Public Affairs, composed largely of Republican operatives, to create and staff the coalition. The Coalition’s two major initiatives are “save Uber,” another self-described “grassroots” project, and the “Consumer Protection Initiative,” geared, as his Hill article proposes, “to reform the agency in order to ensure the principles of consumer choice and freedom are protected in the course of the CFPB’s pursuit of consumer protection.”

Is the Coalition well funded, or a make-time project for Wise Public Affairs? Who knows, because there isn’t a posted 990 for the organization on its own website or on GuideStar? There’s no listing of board members or staff for the Coalition on its webpage, and because it is organized as a 501(c)(4), there’s little likelihood that the organization will reveal the identity of its anonymous donor or explain exactly what it is doing with at least 51 percent of its resources to carry out social welfare functions as opposed to partisan political aims. This is the danger of the very loosely monitored and regulated collection of 501(c)(4) social welfare organizations in this era of post-Lerner IRS dysfunction and paralysis.

Contrast this 501(c)(4) against other legitimate consumer rights organizations. On the webpage of the Consumer Federation of America, for example, you will see that CFA has a membership of about 250 organizations, including 100 state or local advocacy organizations, and a board that includes representatives from the National Association of Housing Cooperatives, the National Farmers Union, the New Economy Project, Consumer Action, and other organizations. Unlike the Wise project, CFA is a real coalition. Not surprisingly, CFA has a long list of documents, press releases, and congressional testimony about the Bureau, including laudatory commentary on the Bureau’s payday lending proposals and the Bureau’s efforts to protect service members from hidden interest charges and abusive debt collection practices, and a call to Congress to reject the Regulations from the Executive in Need of Scrutiny Act and the All Regulations Are Transparent Act, both despite their names designed to frustrate federal efforts to protect consumers from predatory financial products and practices.

The point of comparing the U.S. Consumers Coalition with the Consumer Federation of America is not just to point out the ideological biases in the Consumers Coalition article (the “nanny state” wording is a dead giveaway), but also to raise another issue for nonprofit readers. When groups like the Coalition use terminology like “coalition” and “grassroots,” isn’t it appropriate for nonprofit leaders to raise questions and challenges—regardless of the political positions the organizations take? Someone has to stand up in the leadership of national nonprofit organizations and call out those groups—particularly (c)(4)s, but undoubtedly (c)(3)s as well—that purloin the language of coalitions and grassroots movements when they are nothing of the sort. Otherwise, the lingua franca of the nonprofit sector is cheapened beyond meaning, and nonprofits that witness this kind of stuff become unwilling parties to the dynamic.—Rick Cohen