Have you ever been an eyewitness to an event and later seen it written about in a way that directly contradicts your experience? As three people who witnessed close-up the Consumer Financial Protection Bureau as it began its work after the worst financial crisis since the Great Depression, we are having that sensation as lawmakers in Congress rationalize their proposed evisceration of the agency.
We were members of the inaugural Consumer Advisory Board for the CFPB in 2012. As board members in the initial years of the agency’s formation, we had the opportunity to converse with CFPB management and staff three times a year on almost all types of its activities as it grew into a full-fledged public protection agency.
As the CEO of a California nonprofit, a Midwestern professor and the CEO of a Mississippi credit union, we watched all of this from different vantage points. Other CAB members were equally diverse, including senior officials at the nation’s largest banks, an advocate for senior citizens, the director of a Realtors’ trade association and a state court judge.
What we saw as the CFPB developed was an extraordinary effort to move effectively and carefully to prevent the abuses that led to the financial crisis. The CFPB sought varied advice on every rule and policy it adopted. We were impressed time and again at how the agency carefully weighed market impacts and tried to understand how complex financial regulatory choices would impact everyday consumer decisions. Allowing CAB members to weigh in on these choices was a small part of impressive efforts to make sure all sectors had a voice.
The Financial Choice Act, which recently passed the U.S. House, is exactly the opposite of this approach. It is an almost naked attempt to destroy thoughtful public policymaking under the guise of rolling back nonexistent excesses in CFPB regulation and enforcement.
The act would hobble the CFPB’s ability to attack unfair and deceptive practices, allegedly because this authority is “opaque and ill-defined.” This is the exact same law enforced by the Federal Trade Commission to protect consumers for 80 years and the most commonly invoked authority of state attorneys general in consumer protection enforcement. The CFPB has used this authority extensively in returning over $12 billion to consumers who were deceived or treated unfairly by banks and other financial institutions.
A good example is CFPB enforcement actions against unfair and deceptive charges on credit cards. Banks sell to telemarketers and direct-mail companies special access to your credit card. The companies use this access to charge your card without getting the account number from you. Unsurprisingly, this results in unknown and unwanted charges for junk products that disproportionately impact the elderly. The CFPB has taken action to stop this practice by Citibank ($700 million to consumers), Bank of America ($727 million to consumers), Capital One ($140 million to consumers), Chase ($309 million to consumers) and more.
And the specific actions identified by supporters of the legislation as examples of the CFPB misusing its authority to challenge unfair and deceptive practices of this type? There are none. Instead, the bill’s supporters in Congress are hoping that Americans will accept general bromides about “freedom” to distract from the act’s elimination of much-needed consumer protections.
Nothing makes this point more obvious than the many specific provisions inserted into the act to shield the worst abuses by the financial services industry. Payday lenders, not the American public, are clamoring for a law that would stop the CFPB from issuing safeguards for loans that trap borrowers in debt. The entire financial services industry will be the beneficiary of the act’s provisions to allow continued use of boilerplate contracts that remove the rights of their customers to sue in court or have their case heard before a jury.
This industry-friendly legislation would stop consumers who file a complaint with the CFPB from having the option to share their story publicly on the CFPB website, ensuring that unscrupulous activities would take much longer to get out in the open. That’s depriving Americans of choice, not something that belongs in a bill called the “Financial Choice Act.”
The proposal also would eliminate the CFPB advisory boards, including the Consumer Advisory Board and the Community Bank Advisory Counsel. Eliminating independent advisers is a great way to make sure no one is observing the dismantling of public protections for the benefit of the powerful.
Prentiss Cox is a law professor at the University of Minnesota. Jose Quinonez is founder and CEO of Mission Asset Fund in San Francisco. William Bynum is CEO of HOPE Credit Union in Jackson, Miss.