Today marks the sixth birthday of the Consumer Financial Protection Bureau (CFPB), a consumer watchdog group formed in response to the 2008 financial crisis. The brainchild of Senator Elizabeth Warren (D-Mass.), the CFPB advocates for consumer protections against usury financial products, as well as enabling consumers’ capacity to advocate for retribution against these practices.
The CFPB has achieved success in its mission. According to Consumer Reports, since its inception in 2011 the CFPB has won $12 billion in refunds for 29 million Americans who have been mistreated by financial companies. The CFPB’s efforts target mortgage abuses, predatory student loan servicers, abusive banking practices, resolving consumer complaints, and distributing information. On one hand, those informed about the CFPB’s actions regard the agency favorably. In a survey published by Creditcards.com, a credit card shopping website, 3 out of 4 respondents who knew of the CFPB had a favorable opinion toward it. On the other hand, 81 percent of respondents did not know enough about the agency to regard it either favorably or unfavorably.
It is the CFPB’s relative obscurity from public opinion which, in part, facilitates the current Congressional legislation to limit the CFPB’s scope of activities — and even dismiss the Bureau altogether, a bill (Repeal CFPB Act) put forth by Sen. Ted Cruz. Opponents’ critiques of the agency are diverse. Rep. Jeb Hensarling (R-Texas) maintains that the CFPB limits consumer choice. Some opponents are critical that the CFPB is led by a single individual, Richard Cordray, instead of a multi-member commission. Currently, Cordray, who was appointed by President Obama, can only be dismissed by the President with due cause. Legislation proposes that the President should be capable of firing a CFPB director like Cordray at will. Others still, such as Alan Kaplinsky, a Philadelphia-based attorney at Ballard Spahr, a law firm that represents banks and consumer finance companies, emphasize that the agency succumbs to the trappings of bureaucracy — creating paperwork problems that add unnecessary costs to a budget-strapped government.
A particularly troublesome piece of the legislation, named the Financial Choice Act, contains an anti-arbitration clause, which is set to take effect in September that forbids consumers to file a class action lawsuit. This proposal would make it more difficult for consumers who were exploited by widespread malpractice, such as the fraudulent accounts set up by Wells Fargo Bank, to mobilize a lawsuit against a financial product provider.
Pam Banks, senior staff attorney with Consumers Union, the policy and mobilization arm of Consumer Reports, believes that weakening the CFPB would have devastating effects for consumers. “Without the CFPB, consumers would be left defenseless against those who would treat them unfairly, cheat and abuse them for profit,” she said.
Research demonstrates that there is strong bipartisan support among consumers for the CFPB and the vital role the agency plays in ensuring consumers are protected from financial product providers who would otherwise exploit them for personal gain. A 2015 survey of banker ethics conducted by The University of Notre Dame and Labaton Sucharow LLP found that one-third of bankers who earned annual salaries of $500,000 or more said they had witnessed or have first-hand knowledge of malpractice in the workplace. One-fourth said they would break the law themselves if doing so could make them $10 million. The deep-seated culture of financial malpractice precludes the possibility of a market free from government oversight.
If you are experiencing financial hardship or believe you may be a victim of financial malpractice, visit the CFPB’s website.
In an effort to celebrate and preserve the CFPB on its sixth birthday, please sign Consumer Union’s petition.