The White House may be in chaos. But at least Congress is addressing the issue Americans care about most: making it easier for the finance industry to rip them off.
Last week, Jeb Hensarling (R-Tex.), chairman of the House Financial Services Committee, circulated an outline of his latest plan to repeal Dodd-Frank. Dodd-Frank, you may recall, was put in place after the financial crisis to reduce our chances of having another one.
The law isn’t perfect, but it did have at least one critical, mostly popular component: It created an agency dedicated solely to helping consumers fight back when financial institutions cheat or mislead them.
This agency is called the Consumer Financial Protection Bureau (CFPB). It oversees large banks, thrifts and credit unions, along with lots of companies in the “nonbank” universe, such as mortgage brokers and servicers, payday lenders, debt collectors, private student lenders and credit bureaus.
While the CFPB may not have the same name recognition as, say, the Federal Reserve, many of its actions have generated big headlines.
Remember when Wells Fargo got caught creating millions of fake customer accounts? The bureau helped lead that investigation, which resulted in a $185?million settlement.
The bureau has also, among other things, sued pension-advance companies that fleece veterans, and it ordered the firms that left low-income users of prepaid RushCards unable to access their own money to pay $13 million in restitution and fines.
In its five years of existence, the bureau says it has recovered $11.7 billion for more than 27 million consumers.
The financial industry, understandably, is not super keen on this independent federal agency. And neither is Hensarling, who – just coincidentally? – has received generous campaign contributions from the finance industry.
Hensarling’s leaked memo lays out updates to legislation he introduced last year (which, among other things, required that CFPB employees be paid less than their counterparts at other federal financial regulatory agencies).
Under the Orwellian section heading “Empowering Americans to Achieve Financial Independence,” the memo explains how Hensarling intends to further disempower this agency – and by extension, American consumers.
For instance, the CFPB director would become an at-will political appointee. This means that – unlike the officials who run the Fed, Federal Trade Commission or Securities and Exchange Commission – the CFPB director could be fired without cause. The bureau would cease to be an independent agency and could be pressured at any time to drop investigations of, say, friends of the president.
According to the memo, Hensarling also plans to repeal the CFPB’s supervisory powers. This is a fancy way of saying the bureau would no longer have the right to kick the tires and look under the hood – that is, to regularly examine what’s going on inside the institutions it regulates to make sure they’re following the law.
Even more disturbing, the bureau would no longer be allowed to punish firms that cheat their customers. At most, it could tell the firms to please stop cheating (or else!).
Yes, you heard that right. No more fines and no more penalties. It’s not even clear from Hensarling’s memo that the bureau could force firms to return any money they’ve already pinched from consumers.
In such a world, why not grab as much as you can?
We don’t know exactly how the bullet points in this memo will get translated into legislation. (A spokeswoman for the House Financial Services Committee declined to comment on the memo.) But it seems likely that consumer protections would wind up even weaker than they were before the crisis.
That’s because Dodd-Frank took the authority to enforce some consumer protection laws away from other regulators and gave them to the newly formed CFPB. Assuming those authorities aren’t being re-delegated to these other agencies – and the memo does not indicate that will happen – they’ll remain with a bureau that’s essentially powerless to enforce them.
Of course, many of these policy changes make sense if your worldview is that government should stay out of private transactions because consumers are smart enough to fend for themselves. Which brings me to the weirdest and least defensible parts of Hensarling’s plan: an effort to make consumers dumber.
Hensarling’s memo not only strips the CFPB of most supervisory and enforcement powers; it also eliminates the bureau’s research functions, its public database of consumer complaints (so much for transparency) and even its consumer education functions. Right now, the bureau publishes educational materials on its website and partners with libraries, veterans groups and other community organizations. It’s hard to imagine what legitimate public interest lies in killing efforts to promote financial literacy. But in the con-man economy, maybe public interest is no longer a consideration.