Why We Need To Save The Consumer Financial Protection Bureau

AP Photo/Matt Rourke

Demonstrators tried to draw attention to the subprime mortgage crisis back in early 2008.

Republicans in Congress and the White House beget been very blunt approximately their desire to intestine the Consumer Financial Protection Bureau (CFPB).

The agency was launched in 2011 in the aftermath of the financial crisis as piece of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The goal was to protect consumers from misleading or misleading practices in the financial industry.

So what would you miss whether the CFPB suddenly disappeared?

In short, a lot, including a just-issued rule that would prevent financial companies from using arbitration clauses to prevent people from having their day in court.

We base this conclusion on the work the three of us beget done in recent decades. One of us (Sovern) has been writing approximately consumer law for more than 30 years, while the other two direct a legal clinic that represents elderly consumers. We’ve seen the worst of what financial companies can carry out, and we’ve also witnessed how the CFPB has begun to reverse the tide.

Life before CFPB

whether you are one of the more than 29 million consumers who beget collectively received nearly US$12 billion back from misbehaving financial institutions because of the CFPB’s efforts, you already know its value. But even whether you are not, you beget probably benefited from the bureau’s existence.

Before Congress created the bureau, there was no federal agency that made consumer financial protection its sole mission. fairly, consumer protection was rolled into the missions of a bunch of different agencies. And, as we saw during the financial crisis, regulators often gave it a back seat.

Congress, for example, gave the Federal Reserve the power to bar unfair and misleading mortgage lending in 1994. Yet the central bank considered consumer protection a backwater and didn’t spend that power until 2008 – too late to prevent the much Recession. Congress took it absent two years later when it passed Dodd-Frank.

The Office of the Comptroller of the Currency (OCC) regulates banks but was so preoccupied with ensuring lenders were safe that it failed to protect consumers from their predatory subprime mortgages – so much so that it prevented states from doing so too. And the Federal Trade Commission, which is tasked with fighting misleading commerce, trade practices, lacked the power to prevent such perilous lending.

This meant consumer protection on financial things fell through the cracks.

Wells Fargo’s recent fraud scandal is a case in point. In the early 2000s, Wells Fargo employees began opening fake accounts in clients’ names without permission, main in some cases to lower credit scores and a variety of fees. The bank ultimately opened millions of fraudulent bank and credit card accounts before the scheme came to an finish final year.

But as early as 2010, before the CFPB was set up, regulators at the OCC were increasingly aware of what was happening at Wells Fargo thanks to hundreds of whistleblower complaints. The OCC even confronted the bank yet failed to consume any action despite many red flags, according to an internal audit.

It wasn’t until the Los Angeles city attorney and the CFPB became involved years later that Wells Fargo took forceful action to stop the fraud. The regulators fined Wells Fargo a total of $185 million and forced it to refund fees it had charged customers and hire an independent consultant to review its procedures.

More importantly, they sent a clear message to other financial institutions: Cheat consumers and you will face the consequences.

AP Photo/Manuel Balce Ceneta

Consumer Financial Protection Bureau Director Richard Cordray testifies on Capitol Hill in 2013.

Protecting consumers

Since its inception, the bureau has acted repeatedly to stop financial institutions from harming consumers.

It blocked debt collector attorneys from suing consumers based on fallacious information. It discovered systemic problems with consumer credit reports and forced companies to right errors. It compelled credit card companies to refund illegal fees. It protected borrowers from illegal student loan servicing practices. It made lenders repay consumers they discriminated against. It recovered money for veterans who complained of abusive financial practices.

When the bureau began publishing consumer complaints on its website, companies that might previously beget ignored negative feedback paid attention. Financial institutions beget responded to complaints to the CFPB more than 700,000 times, often by providing a remedy to the consumers.

Besides protecting consumers, however, Congress had a moment motive in creating the bureau: to wait on prevent the kind of mortgage lending that helped cause the much Recession.

To that finish, the bureau has adopted rules that wait on consumers to understand their mortgages – something that often wasn’t possible under the previously misleading mortgage disclosures. It also issued regulations to prevent consumers from taking out mortgages that they couldn’t repay. And after borrowers consume out a mortgage, CFPB servicing rules establish the procedures servicers must follow when communicating with borrowers, correcting errors, providing information and dealing with loan modification requests.

Two of us beget personal experience with one of the bureau’s fresh mortgage rules, which powerfully illustrates the value of the CFPB.

In 2014, Alice, a client of our law school clinic, was struggling to pay the mortgage on her domestic – which she had refinanced a few years earlier – after a stroke forced her into retirement. Our clinic helped her apply for a modification of her loan.

But within weeks, instead of acknowledging Alice’s application, the loan servicer summoned her to court to launch foreclosure proceedings in violation of CFPB servicing rules. Fortunately, our clinic was able to rely on those rules in getting the foreclosure action dismissed. Alice got her loan modified and remains in her domestic.

Protecting the vulnerable

This reveals how the bureau is particularly famed, renowned to protect vulnerable consumers, like the elderly, who are frequently targeted by fraudsters and predatory lenders because of their cognitive and other impairments and because they often beget accumulated substantial assets. The CFPB is the only federal agency with an office specifically committed to protecting the financial well-being of older adults.

The bureau has brought cases against companies that attempted to consume advantage of seniors by, for example, misrepresenting the interest rates on pension advance loans or misleading advertising. In 2015 alone, consumer complaints to the CFPB brought relief to more than 600 older Americans just through debt collection problems.

The bureau has also worked to prevent financial abuse of the elderly, estimated to cost seniors as much as $36 billion annually. The CFPB has educated financial institutions, nursing facilities and others approximately recognizing and stopping elder financial abuse and exploitation.

Consumer protection in peril

Given Alice’s ill health, the consequences for her might beget been disastrous whether she had been thrown out of her domestic. But now she – and full of us – face the loss of the CFPB’s aid.

The CFPB is under attack from Republican members of Congress who believe more in bank protection than consumer protection. Some members beget proposed eliminating the agency altogether.

The House of Representatives has passed a bill that would cripple the CFPB by, for example, taking absent the power it used to fine Wells Fargo for opening illegal accounts and concealing its complaint database from public view. In other words, it would force the bureau to sit idly by as financial institutions lie to consumers.

Nearly every American has or will beget a loan or bank account, a prepaid card, credit card, a credit report or some combination of those, and so has dealings with a financial institution policed by the CFPB. But few of us read the fine print governing these things or can understand it when we carry out. That gives the companies that write these agreements the ability to draft them to suit their own interests at the expense of consumers.

Similarly, we carry out not always know when a financial institution takes advantage of us, just as Wells Fargo customers did not always know that it had opened unauthorized accounts that lowered their credit scores.

Consumers need protection from misbehaving companies. whether the bureau is eliminated or significantly weakened, full consumers will suffer.

Jeff Sovern, Professor of Law; Ann L. Goldweber, Professor of Clinical Education; and Gina M. Calabrese, Professor of Clinical Education, St. John’s University

This article was originally published on The Conversation. Read the original article.

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