The Undoing of the CFPB: Why Consumers Should Know and Care

Money, Mississippi.” Credit: Department of Communication University of Washington

December 5, 2017; The Atlantic and the Washington Post

As the Trump administration removes and replaces all vestiges of Obama’s eight years in office, one of the agencies that could disappear might do so without so much as a whimper from much of the general public, to the detriment of consumers across the nation who will feel the pain but not know what they lost.

The Consumer Financial Protection Bureau (CFPB) was established in 2010 as a part of the Dodd-Frank reforms following the 2008 financial crisis. Its purpose is consumer protection in the financial sector, with a focus on banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors, student loan providers, and other financial companies operating in the United States. According to the US Treasury Department, the bureau is tasked with the responsibility to “promote fairness and transparency for mortgages, credit cards, and other consumer financial products and services.”

Given this task, and that most Americans have or use some form of credit, it seems likely that the CFPB would be well known and put to good use. But, that’s not so. As reported by Gillian B. White for the Atlantic:

A 2013 poll of 1,000 people done by a progressive nonprofit, Americans for Financial Reform, showed that only about 40 percent of Americans hadn’t heard of the CFPB or had no opinion about it. It doesn’t seem like awareness improved much with time. In a small but representative survey of around 500 adults conducted in 2017 by the financial product–recommendation website CreditCards.com, approximately 81 percent said they didn’t know enough about the agency to have an opinion about it.

This is a sad state of affairs for an agency that is working to put money back into the pockets of ordinary consumers and insure that financial institutions operate with transparency.

An example of the agency’s work included the unexpected receipt of a $1,600 check by Joel Wertheimer, a civil rights lawyer from New York.

“I sort of didn’t believe it,” he said. The notice that came along with the check said that he was receiving the payment in relation to “a debt-protection program offered by Citibank.” Wertheimer had opened up a credit card with Citibank when he graduated from college and vaguely remembers language about a credit-protection program. “I thought that was something I needed,” he remembers.

It turns out that Wertheimer’s was one of the 7 million accounts that the CFPB determined fit the criteria of deceptive marketing and unfair billing practices at Citibank—where so-called “add-on” programs didn’t offer that much protection at all, and suckered customers into paying for the extraneous services with misleading promotions. Wertheimer’s $1,600 check came from the $700 million fine the Bureau levied against the bank for its practices—and he didn’t have to do anything to receive the money he was due.

Via its website and phone system, the CFPB is set up to respond to finance-related consumer complaints both large and small, and it has been doing so since its creation. Many complaints over forced mediation clauses have found their way to the CFPB, although much of this work is still in process.

As unknown as the CFPB is, it has been embroiled in controversy since its creation. Before her election to the U.S. Senate, the CFPB was the brainchild of Senator Elizabeth Warren, who advocated for its creation with the support of the Obama administration. It has been a thorn in the side of Republicans since it was proposed. The fact that the position of CFPB Director has somewhat “protected” status—the director, once nominated by the president and approved by the Senate for a five-year term, cannot be forcibly removed—has caused even greater consternation for the new administration. A federal appeals court ruled in 2016 that the structure at the CFPB is unconstitutional and ordered that the CFPB be restructured. But the resignation of Richard Cordray, the first CFPB Director, and President Trump’s immediate naming of Office of Management and Budget Director Mick Mulvaney as acting director has created a sense of impending doom for this agency among those who viewed it as a beacon of protection for consumers in this country.

Acting Director Mulvaney says he has no plans to gut the agency, but his history of publicly criticizing it may be a sign of things to come. One of his first acts as acting director was to put a 30-day freeze on hiring, regulation, rulemaking, and payouts to consumers.

As the nation looks at the reinstatement of President Trump’s travel ban, one finds crossover with the CFPB there, too.

Libre by Nexus helps post bond for people being held in immigration detention centers while they wait for their cases to be heard in backlogged courts. In exchange for their freedom, immigrants sign contracts promising to pay Libre $420 per month while wearing the company’s GPS ankle devices. Those contracts have been the subject of lawsuits and allegations of fraud by immigrants who said that they did not understand them. The company has denied wrongdoing.

Soon after Mulvaney’s appointment, it was announced that the CFPB would pull back on its probe of Libre by Nexus until a federal judge ruled on a lawsuit the company filed against the agency. According to an article in the Washington Post, the announcement indicated that all of the agency’s investigations and lawsuits are being reviewed.

As with other takeovers of government agencies, this one will probably follow a similar path of dismantling regulations and an exit of qualified staff with a commitment to the original intent of the work of consumer protection. If you were counting on someone, somewhere in government to watch out for you and your finances, that agency may now be a thing of the past.—Carole Levine