Future is dim for consumer agency
Democratic lawmakers pleaded with their Republican counterparts last week not to mess with financial reform in general or the Consumer Financial Protection Bureau in particular. But that looks like wishful thinking.
A stopgap government funding bill passed in September will expire Dec. 9. It’s widely expected that conservative members of Congress will include language in follow-up funding legislation that would change how the bureau operates and the scope of its authority over financial institutions.
“Congress must not include in end-of-year funding legislation any riders designed to repeal, undermine or delay any provisions of Wall Street reform, including those targeted at the Consumer Financial Protection Bureau,” Rep. Maxine Waters, D-Calif., and Sen. Sherrod Brown, D-Ohio, said in a letter to the leaders of the House and Senate.
They added that “it would be irresponsible for you to use the appropriations process as a replacement for committee consideration of legislation through regular order.”
Like that’s going to stop lawmakers who have been trying for years to cripple the Dodd-Frank Wall Street Reform and Consumer Protection Act.
It became law in 2010 and placed a host of regulatory restrictions on banks, mortgage companies and other businesses that were seen as a key cause of the financial meltdown that ushered in the Great Recession.
For consumers, perhaps the most significant aspect of Dodd-Frank was creation of the CFPB, a watchdog agency charged with protecting the interests of credit card holders, home loan recipients and others who in the past may have found themselves largely powerless to stand up against such powerful business interests.
Since it got up and running, the bureau says it has recovered about $12 billion ripped off from consumers by illegal or questionable practices. This month, for example, the CFPB filed a lawsuit against Virginia’s B&B Pawnbrokers “for deceiving consumers about the actual annual cost of its loans.”
The business community says the CFPB has too much power. Most consumers would probably counter that if businesses kept their noses clean, there’d be no need for such an agency.
“Dodd-Frank and specifically the bureau have been incredibly cost-effective,” said Sally Greenberg, executive director of the National Consumers League. “They have delivered billions of dollars wrongfully taken from consumers.”
She said critics of the CFPB are guided not so much by concerns of regulatory overreach but rather by a feeling among financial firms that any additional supervision is unnecessary.
“In fact, the agency has done a terrific job of being even-handed,” Greenberg said. “It should continue on the course it’s on.”
That seems unlikely.
In September, the Republican-controlled House Financial Services Committee passed a bill written by its chairman, Rep. Jeb Hensarling, R-Texas, to roll back Dodd-Frank and water down the CFPB’s enforcement power.
Reflecting more business-friendly marching orders, the agency would be renamed the Consumer Financial Opportunity Commission, run by a five-member, bipartisan commission that would no longer have the authority to ban bank services or products deemed “abusive.”
In the 2014 election cycle, Hensarling was Congress’ No. 1 recipient of cash from payday lenders, pocketing $68,000.
Meanwhile, the Court of Appeals for the D.C. Circuit ruled last month that the CFPB’s organizational structure is unconstitutional. It said an independent agency with a single director appointed by the president does not provide for sufficient separation of powers.
The bureau appealed the ruling last week. It remains to be seen whether President-elect Donald Trump, after he takes office, will be able to hand CFPB Director Richard Cordray his walking papers. Until now, the director could only be removed for cause — that is, for abuse of power.
A CFPB spokeswoman declined to comment.
The court case notwithstanding, it appears all but certain that Republican lawmakers will pass legislation gutting the bureau and that Trump will sign it. He said prior to the election that he was committed to doing away with Dodd-Frank.
Consumer advocates, however, are hoping for the best. “Over the last five years, the Consumer Financial Protection Bureau firmly established itself as the first and most important line of defense against predatory, illegal practices by the financial companies,” said Emily Rusch, executive director of the California Public Interest Research Group.
“President Trump and the Republican-led Congress can show they side with consumers, not big banks, by protecting the independence of this watchdog agency,” she said.
In their letter to congressional leaders, Waters and Brown noted the important role that the CFPB recently played in holding Wells Fargo accountable for opening more a million accounts without customers’ permission. Regulators, led by the bureau, slapped Wells with a $185 million fine.
“Given the recent scandal at Wells Fargo, where the banks’ employees were under pressure from bank management to open as many customer accounts as possible, it’s clear that our financial markets need stronger rules and oversight, not less,” the Democratic lawmakers wrote.
What’s clear is that our next president and his Republican allies in Congress seem to think otherwise.
And consumers will return to fending largely for themselves.
David Lazarus, a Los Angeles Times columnist, writes on consumer issues