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Archive for the ‘CFPB’ Category

Working People Need a Strong CFPB with a Leader Who Supports Its Existence

Wednesday, November 29th, 2017

The Consumer Financial Protection Bureau was created after the Great Recession of 2008 wreaked havoc on the U.S. economy, causing millions of families to lose their homes to foreclosure and forcing millions of working people onto the unemployment rolls. Its mission is to protect working people from tricks and traps in consumer financial products like home mortgages and credit cards.

The CFPB has proven extremely effective. Since its creation in 2010, the bureau has returned $12 billion to consumers wronged by lenders. Twenty-nine million consumers have received relief.

The bureau owes much of its success to strong leadership. Sen. Elizabeth Warren (D-Mass.) originally had the idea to create the CFPB when she was a law professor at Harvard and led the bureau in its infancy. In 2012, she was succeeded by Richard Cordray, who had a strong record of pursuing wrongdoing against consumers as Ohio attorney general before his time at the CFPB.

Cordray, however, resigned last week, and President Donald Trump named Office of Management and Budget Director Mick Mulvaney to replace him.

There are a few problems with this. First, Mulvaney already has a job leading the Office of Management and Budget and has shown no intention of stepping down from the post. Mulvaney also has been highly critical of the CFPB, calling it a “joke…in a sick, sad way.” Finally, there are legal questions about who gets to lead the bureau when the director steps down—the deputy director or someone appointed by the president.

In addition, Mulvaney’s former chief of staff, Natalee Binkholder, left Mulvaney’s congressional staff to go to work as a lobbyist for Santander, a bank that has faced sanctions from the bureau and is reportedly facing a CFPB lawsuit alleging that it overcharged consumers for car loans.

We learned the hard way from the financial crisis in 2008 that working people need the CFPB. We need the bureau to fight to protect us from predatory lenders and, in order to be effective in doing that, it needs to be led by a strong, full-time director who believes in its mission. Consumer financial protection is a full-time job, not a side gig for someone who things it’s a “joke.”

This blog was originally published at AFL-CIO on November 28, 2017. Reprinted with permission. 

About the Author: Heather Slavkin Corzo is the director of the AFL-CIO Office of Investment. She joined the AFL-CIO in 2007 as a research analyst and was the senior legal and policy adviser from 2007 through 2014.

New CFPB Rule – a Poster Child for Regulation

Tuesday, July 25th, 2017

The new CFPB rule is critically important in its own right, but it is also interesting to view the battle over this rule as a microcosm of the fight we so often see between free market devotees and fans of regulation. Bankers, credit card issuers, payday lenders and the Chamber of Commerce have urged for many years that consumers should be free to “choose” to resolve disputes through individual arbitration – supposedly a quicker, cheaper better mode of dispute resolution as compared to litigation and class actions.  In contrast, those who oppose forced arbitration assert that such arbitration is unfair for consumers and bad for society as a whole.  Ultimately this battle between free marketeers and pro-regulation forces turns on principles of economics, psychology, and political philosophy, as I have detailed elsewhere.

While those who oppose regulation urge that financial consumers should be free to choose to resolve future disputes through individual arbitration rather than through class actions, empirical studies and common sense tell us that consumers do not knowingly choose a contract based on the arbitration clause.  We do not focus on such clauses, we do not usually understand them and our human psychology leads us to be overly optimistic that no disputes will arise in any event.  Nor would it make sense for all consumers to spend the time and energy to try to figure out such clauses.

We also cannot count on the miracle of Adam Smith’s invisible hand to ensure that financial service companies act in the best interest of consumers.  The lack of perfect competition, customers’ lack of complete information, the impact of clauses on third parties and the unequal initial distribution of resources all ensure that the market will not miraculously do what is best for customers.

Philosophically, how can one argue with a straight face that clauses imposed unknowingly in small print contracts are supported by principles of freedom or autonomy?  As Professor Hiro Aragaki has explained, perhaps autonomy supports freedom from contracts of adhesion more than freedom of contracts of adhesion.

So, we need regulation. What should the regulation look like? Is forced arbitration the quicker, cheaper, better form of dispute resolution that its advocates suggest? Do class actions help consumers or do they only enrich the lawyers who bring them? The CFPB used extensive empirical investigation to answer these questions.  It found that (1) financial consumers are typically unaware of the arbitration clauses to which they are subjected; (2) only miniscule numbers of financial consumers actually bring claims in arbitration; and (3) financial class actions, e.g. over improper check bouncing charges, have brought billions of dollars of benefits to millions of consumers and also imposed non-monetary sanctions, all helping to deter future illegal conduct.  Thus, CFPB concluded that, at minimum, it should prevent financial companies from using arbitration to insulate themselves from class actions.  It issued the rule to achieve that end.  The new CFPB rule also requires companies to submit additional information to CFPB regarding their arbitration programs so that CFPB can conduct additional analyses and decide whether more/different regulation may be needed.

Hurrah for the CFPB!   Its new rule is supported by psychology, economics, and political philosophy.  Nonetheless, the new rule is under serious threat.  Congress may consider proposals to gut the rule as early as next week, and the Acting Comptroller of the Currency is threatening to void it on the ground that allowing financial consumers to sue in class actions would threaten the soundness of the banking system.

The CFPB says otherwise, and expresses surprise that such a claim is being made at the tail end of a very public three year study.

Let’s now all take what steps we can to preserve this rule against the attacks that are coming in Congress, from elsewhere in the bureaucracy, and in the courts.

The Consumer Financial Protection Bureau (CFPB) just issued a new rule prohibiting financial service providers from using forced arbitration to prevent their customers from suing the company in class actions.  While many of us believe this rule is a “great win for consumers,” others are trying to gut it in Congressin the courts, or through administrative action by the Comptroller of the Currency.

On the CFPB’s Birthday, Stand Against Sharks

Friday, July 21st, 2017

July 21 marks the six-year anniversary of the Consumer Financial Protection Bureau, which was created in the wake of the Wall Street crime wave that led to the financial crisis of 2008.

The CFPB was first conceived by law professor Elizabeth Warren, now Senator Warren from Massachusetts, as an agency that could protect the American people from being mistreated, defrauded, and otherwise ripped off by powerful bankers who ran institutions that engaged in massive criminal behavior and yet never spent a day in jail.

It is a day to celebrate, and a day to fight.

Why Celebrate?

Why celebrate? Because, despite a number of attempts to tie its hands, the CFPB has been enormously successful. It has provided almost $12 billion in relief to 29 million victims of bank malfeasance.

It has provided nearly 50 million borrowers with new protections from dirty mortgage tricks – including surprise fees and mistreatment for those who fall behind in their payments.

The CFPB has rewritten credit card rules, saving customers more than $16 billion in hidden fees. It has helped stay-at-home spouses and Americans serving in the armed forces.

Why fight? Because Republicans – helped at times by some venal Democrats – are doing their best to gut the CFPB and leave consumers defenseless against the predators on Wall Street.

Inside the Shark Tank

Does the word “predator” seem too harsh a word for bankers? William Dudley, then President of the Federal Reserve Bank of New York, said in 2013 that Wall Street’s big banks suffered from “deep-seated cultural and ethical failures” and “the apparent lack of respect for law, regulation and the public trust.”

2015 survey of banker ethics found an extraordinary tolerance for corrupt behavior and “a marked decline in ethics” since the study was first conducted in 2012. More than one-third of bankers earning $500,000 or more per year said they “have witnessed or have first hand knowledge of wrongdoing in the workplace.”

One in four said they would break the law themselves if they could make $10 million or more by doing it.

Wall Street’s offenses include “price fixing, bid rigging, market manipulation, money laundering, document forgery, lying to investors, sanctions-evading, and tax dodging.”

At last count, banks had paid more than $200 billion in fines and settlements to settle fraud charges. Bank of America had paid more than $77 billion.

Checkered Citi and Chase

Citigroup, the megabank created with bipartisan cooperation from Republican Senator Phil Gramm and Clinton Treasury Secretary Robert Rubin (who later became the bank’s chief executive), had paid nearly $20 billion.

JPMorgan Chase CEO Jamie Dimon considers himself a worthy commentator on economic issues. But, under his leadership, his bank paid nearly $30 billion for crimes over a four-year period.

These include, according to an investors report, violations of the Bank Secrecy Act; money laundering for drug cartels; violations of sanction orders against Cuba, Iran, Sudan, and Liberia; violations of the Servicemembers Civil Relief Act; the fraudulent sale of unregistered securities and derivatives; bribery of state officials; and, obstruction of justice, including refusal to release documents in the Bernie Madoff case.

Voters Aren’t Fooled

new poll finds that “More than nine in ten Americans (91%) believe it is important to regulate financial services, including 71% who believe it is very important. Strong bipartisan majorities say financial regulation is very important.” That includes Democrats (81%), independent voters (75%), and Republicans (58%).

They’re right. When Trump budget director Mick Mulvaney boasts that the fiction he calls “MAGAnomics” will lead to economic growth of more than 3 percent per year, he doesn’t explain that we routinely had that level of growth until unregulated bank fraud led to the financial crisis of 2008.

If we let the Republicans deregulate Wall Street again, it will set the stage for another crisis.

Republicans Are a Shark’s Best Friend

These bankers may break the law – and be unpopular with voters – but they’ve still got friends on Capitol Hill. Right now Republicans like Sen. Tom Cotten are working to undermine the CFPB’s new arbitration rule, which is set to take effect in September.

This rule ends banks’ ability to force customers into arbitration, a process that’s skewed in Wall Street’s favor. The CFPB rule would make it possible for customers to once again file class-action suits. Given Wall Street’s deep pockets for attorney’s fees, class-action suits are one of the few tools customers have for defending themselves in court.

House Republicans also passed the so-called “Financial Choice Act” – “Financial Carnage Act” might be a better name – a bill that would gut the CFPB and strip away other consumer protections.

When the Republicans fight the CFPB, they’re standing with the student loan predators at Navient. That’s the loan servicing company the CFPB sued earlier this year for cheating borrowers of their rights. That means they’re standing against the 44 million Americans who owe more than $1.4 trillion in student debt.

When the Republicans fight the CFPB, they’re standing with the bankers who defrauded mortgage holders and fraudulently foreclosed on American families. That means they’re standing against the millions of Americans who currently hold more than $14 trillion in mortgage debt.

When the Republicans fight the CFPB, they’re standing with the payday lenders who have trapped hundreds of thousands of lower-income Americans into a debt trap that can lead to annualized interest rates of 300 percent. That means they’re standing against the estimated 12 million Americans who pay an average of $520 per year in interest on eight $375 loans. These borrowers would be protected by the CFPB’s proposed payday lending rules.

People’s Action is repeating its annual “shark week” tradition, which draws attention to  this year, with anti-payday lender actions timed to coincide with the Discovery Channel’s “shark week” programming.

The CFPB has provided an extraordinary amount of help to millions of Americans in just six years. Now it needs our help.

This blog was originally published at OurFuture.org on July 21, 2017. Reprinted with permission.

About the Author: Richard (RJ) Eskow is a writer and radio journalist who has worked in health insurance and economics, occupational health, risk management, finance, and IT. He is also a former musician.

The Time Is Now to Stand Up for the CFPB

Tuesday, May 23rd, 2017

Mark Feuer, the Los Angeles City Attorney who helped hold Wells Fargo accountable for creating millions of fake accounts without customers’ knowledge, now warns against efforts by the Trump administration and Congress to dismantle the Consumer Financial Protection Bureau.

“I’m appalled at the spectacle of the House attempting to dismantle or at least severely diminish the CFPB,” Feuer told CNNMoney in a recent interview. He was referring to a bill disingenuously called the CHOICE Act, which would neuter the now-independent CFPB so that it no longer serves as a watchdog against the predatory practices of financial institutions.

People’s Action is asking for signatures on a petition calling on Congress to vote “no” on the CHOICE Act, which in expected to come up for a vote in the coming weeks.

Feuer explained in the interview that the CFPB played a crucial role in investigating reports that Wells Fargo employees were fabricating accounts under pressure to meet sales quotas. Those fake accounts, in turn, showed up in financial reports that helped Wells Fargo boost its stock price and, as the stock price rose, executive earnings.

“It’s true we brought the case in the first place” in response to a 2013 Los Angeles Times exposé, Feuer said, “but our collaboration with the CFPB enabled there to be nationwide relief for Wells customers.”

That included $5 million in refunds to consumers who were assessed fees on the fake accounts and changes in sales practices at the bank. The bank also had to pay $185 million in fines, and did away with the sales quotas that led to the creation of the fake accounts.

You would think that a House of Representatives that is answerable to consumers vulnerable to what Sen. Elizabeth Warren calls the “tricks and traps” big banks, predatory lenders, and debt collectors use to take billions of dollars out of their pockets would consider the CFPB to be a hero.

But that House of Representatives does not exist. The majority of the House is instead answerable to the very tricksters who want free rein to game the system and line their pockets. Republicans love the campaign donations they get from Wall Street bankers, payday lenders, and hedge fund managers. They are literally itching to destroy the CFPB and let Wall Street go wild.

After the big banks crashed the economy in 2008, people took action and won reforms to rein in Wall Street abuses. A big part of that was establishing the CFPB, and structuring it so that it isn’t a punching bag for a Congress and White House drunk on big-bank financial contributions.

The CFPB is the first federal financial watchdog whose entire job is making sure Wall Street can’t get away with the tricks and traps that bleed millions out of our pockets. The Bureau has recovered $12 billion dollars in ill-gotten gains for over 27 million people ripped off by the predatory financial industry.

It is no wonder that gutting the CFPB has been a top priority of the Republican Congress from the beginning. And with all of the scandal now consuming Washington, it would be very easy for Congress to get away with this – unless we “stay woke.”

That’s why we have to get loud about what Congress is doing here.
We’ve derailed Wall Street’s agenda before and, if we stand together, we can stop them again. But that means we need to stop the CHOICE Act dead in its tracks.

Tell Congress: You work for us, not Wall Street. We need our government to do more to rein in payday lenders and Wall Street bankers, not give them a free pass to crash the economy again. Say no to the CHOICE Act. Say yes to an independent CFPB.

This blog originally appeared at OurFuture.org on May 22, 2017. Reprinted with permission.

About the Author: Isaiah J. Poole has been the editor of OurFuture.org since 2007. Previously he worked for 25 years in mainstream media, most recently at Congressional Quarterly, where he covered congressional leadership and tracked major bills through Congress. Most of his journalism experience has been in Washington as both a reporter and an editor on topics ranging from presidential politics to pop culture. His work has put him at the front lines of ideological battles between progressives and conservatives. He also served as a founding member of the Washington Association of Black Journalists and the National Lesbian and Gay Journalists Association.

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