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Trump Appointee Worked for Anti-LGBTQ Group and Tried to Hide It

PAUL WATKINS

In July of last year, it was announced that Paul Watkins would be head of the Consumer Financial Protection Bureau’s Office of Innovation, a new department created by White House Chief of Staff and right-wing ideologue Mick Mulvaney, who was acting director of the CFPB at the time of Watkins’s appointment. 

The purpose of the new division was “to focus on encouraging consumer-friendly innovation” in fintech, short for financial technology, an emerging industry that uses technology to improve activities in finance through smartphones, mobile banking, investing services, and more. 

Just five months after Watkins was appointed, the CFPB proposed a dramatic revision of its “no-action letter” and “product sandbox” policies that will reduce regulatory requirements for new financial technologies. These policies would relax the criteria for companies to apply for enforcement relief as well as grant statutory and regulatory safe harbors and exemptions for certain companies. In a nutshell, these policies will ultimately allow the bureau to exempt entire industries from laws that protect LGBTQ consumers, while granting businesses potentially indefinite exemptions from fair lending laws, safe harbor from federal and state enforcement actions, and immunity from private lawsuits. 

As head of the CFPB Office of Innovation, Watkins is one of the people spearheading these proposals, which means, if they go into effect, he could soon be in a position to wield enormous influence over which antidiscrimination laws companies have to abide by. The proposed changes are not in bills to be considered by Congress but are part of the federal rulemaking process, which means the CFPB can adopt them after a period of public comment. Eighty consumer and community groups — including the NAACP — wrote a letter to Watkins listing all the reasons these changes will negatively impact consumers.  

New reports exclusively released to The Advocate by Allied Progress shows that for nearly two years, Watkins worked as an attorney for Alliance Defending Freedom, which the Southern Poverty Law Center designated a hate group for a number of reasons. Some of them include ADF’s support for “the recriminalization of homosexuality in the U.S. and criminalization abroad,” its defense of “state-sanctioned sterilization of trans people abroad,” and its linkage of “homosexuality to pedophilia and claims that a ‘homosexual agenda’ will destroy Christianity and society.” 

Furthermore, Watkins chose not to disclose his prior employment with ADF on his LinkedIn page — though a Google search certainly shows close ties to ADF. 

During Watkins’s short tenure at ADF, the organization worked with the state of Arizona to legalize discrimination against LGBTQ people and ban same-sex marriage. As Allied Progress discovered, Watkins eventually took a job in the Arizona Attorney’s General Office (which employed numerous alums of ADF), where his new boss signed a friend-of-the-court brief in support of Masterpiece Cakeshop, the bakery discriminated against same-sex couples, in the landmark Supreme Court case — and the bakery happened to be represented by Watkins’s former colleagues at ADF. 

Watkins is also behind CFPB’s efforts to exempt businesses from consumer protection regulations, including crucial antidiscrimination laws like the Equal Credit Opportunity Act, despite strong bipartisan and corporate support for expanding civil rights laws to include protections for LGBTQ individuals, given that the House recently passed the Equality Act

On June 10, Sens. Elizabeth Warren and Doug Jones wrote to the CFPB expressing concerns about how the fintech industry, which Watkins oversees, might be employing biased algorithms that discriminate in lending. 

A recent report by researchers at the University of California, Berkeley, released an analysis of millions of mortgages securitized by Fannie Mae and Freddie Mac between 2008 and 2015. These mortgages were issued both by traditional and fintech lenders after both traditional and algorithmic underwriting. The results were mixed, but not exactly encouraging. 

Researchers found that both face-to-face and fintech lenders charged Black and Latinx borrowers six to nine basis points higher interest rates than white or Asian people. Following the analysis, immediate concern was raised by Warren and Jones that the fintech industry might be employing biased algorithms that reflect human prejudices. 

“What is your agency doing to identify and combat lending discrimination by lenders who use algorithms for underwriting?” the senators ask in their letter, which included other questions such as “What is the responsibility of your agency with regards to overseeing and enforcing fair lending laws? To what extent do these responsibilities extent to the FinTech industry or the use of FinTech algorithms by traditional lenders?” 

Watkins may be held accountable for such questions Tuesday, when the Task Force on Financial Technology will hold a hearing titled “Overseeing the FinTech Revolution: Domestic and International Perspectives on FinTech Regulation” 

“Paul Watkins may keep a low profile in the Trump administration, but that doesn’t mean he doesn’t have any power," says Jeremy Funk, spokesman for Allied Progress. “The fact that someone with such deplorable beliefs could be in a position to influence which laws companies have to follow and which they can ignore is troubling. Congress needs to ensure the CFPB is following its mission to protect all consumers regardless of sexual orientation or gender identity.”

“Handing out Get Out of Jail Free cards to every business that wants to violate antidiscrimination laws would be anathema to that mission. Director Kathy Kraninger should immediately review Mr. Watkins’s ties to a hate group and make clear whether those are the values she wants represented at the CFPB.” 

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