Consumer protection

Consumer protectionJust beyond the Trump swelter of the hour, lawmakers have been busy concocting plans to dismantle key achievements of the Obama years. Among those accomplishments currently targeted is a concerted effort to destroy, defang, scrap (feel free to select the word) the Consumer Financial Protection Bureau.

The CFPB was created to protect consumers from the kinds of predatory practices that played a big part in the financial meltdown of 2007 to 2008. The idea was simple: Create a federal agency to be, to quote Sen. Elizabeth Warren, “the cop on the beat” in the financial sector. The CFPB was to have the ability to take decisive action to shut down questionable practices. The CFPB was designed to be the regulatory safeguard against future financial wipeouts. (Think: Batman.)

It’s Populist!

Given the populist nature of Mr. Trump’s ascent to the White House, it remains for me a real head-scratcher as to precisely why the CFPB is on the chopping block.

The agency is tasked after all with policing financial products (and practices) that specifically take advantage of consumers. It has jurisdiction over a host of consumer “favorites” like credit reporting agencies, payday lenders, debt collectors, debt settlement companies and student loan servicers, as well as banks, credit unions, credit card companies and many other financial services organizations operating in the United States.

With the power to ban financial products deemed “deceptive, unfair or abusive,” the CFPB also possesses the authority to impose significant penalties on financial predators.

What kind of penalties are we talking about? More than $5 billion so far, including a record $100 million against Wells Fargo in 2016 ($185 million all in). The CFPB has helped nearly 30 million consumers recover several billions of dollars in remedies from financial companies. All this, and in 2016 the CFPB, experiencing a huge amount of growth both in programs and staff, stayed $67 million under its budget cap.

So, if the CFPB hasn’t been too expensive for the federal government to run, what’s the problem? Follow the money.

Conservatives argue that the Dodd-Frank Wall Street Reform and Consumer Protection Act (aka Dodd-Frank, the law that authorized the creation of the CFPB) has cost businesses more than $24 billion in compliance-related expenses and 61 million paperwork hours. It’s also a federal agency, and it has a fairly big budget. This is what the Republicans are focused on.

You can almost hear President Trump: “So, why are we spending so much money on this thing? It’s sad, really.”

It’s Under Attack

Rep. Jeb Hensarling, chair of the House Committee on Financial Services, cited what he calls “the avalanche of regulations that smother the U.S. economic system” in his latest rally to kill the Consumer Financial Protection Bureau. This so-called “avalanche” was in response to an economic event that nearly destroyed the world economy.

Hensarling seems to be motivated primarily by conservative ideology, a central tenet of which being that too much centralized power is a bad thing. “The CFPB is arguably the most powerful, least accountable agency in U.S. history,” Hensarling wrote in a recent Wall Street Journal opinion piece. “CFPB zealots have the power to determine the ‘fairness’ of virtually every financial transaction in America. The agency defines its own powers and can launch investigations without cause, imposing virtually any fine or remedy, devoid of due process.”

In an Oct. 11, 2016, decision, a federal appeals court ruled that the president should have the authority to fire the director of the CFPB other than for cause. The agency is currently appealing the court’s decision. “Other than the President,” Judge Brett Kavanaugh wrote for the 2-1 majority, “the Director of the CFPB is the single most powerful official in the entire United States Government, at least when measured in terms of unilateral power.” Anticipating the popular response, Kavanaugh added, “That is not an overstatement.”

The reason I say the attacks are mainly ideological is complicated, but in essence it seems like pressure from financial sector lobbyists plays a big part in the pushback against the CFPB and that the focus on centralized power is really just putting sheep’s clothing on an influence-buying wolf.

I don’t know how else to view the willful misunderstanding of what the CFPB actually does, which is simple: It demands accountability from financial institutions. The idea that, as Hensarling said, the CFPB “requires lenders essentially to read their clients’ minds, know and weigh their clients’ comprehension levels, and forecast future risk” is absurd.

Consider, if you will, the various ways consumers got screwed by the Wild West years in the finance world that led to the Great Recession. There is no mind reading required, but plenty of policing is needed.

It doesn’t matter if it’s the latest SNL sketch or Trump’s policy man Stephen Miller proclaiming that the new administration accomplished more in three weeks than most presidents achieve in four or even eight years — a claim that was quickly quashed — though I suppose he was right if you consider chaos an accomplishment. What matters is that we’re getting distracted from assaults on real progress made since 2008.

Killing the CFPB is an ill-advised and dangerous move, and one that will backfire on Republicans in the long run. As we as consumers filter through the latest, greatest Trump outrage (or triumph), and as we focus on the news cycle, huge things are happening behind the scenes. This one might be a doozy, making America unacceptably vulnerable again.