Wall Street’s Attacks on the CFPB Pose a Threat to American Consumers

Wall Street has no plans to let up in its efforts to undermine the consumer protections passed under financial reform. From January 1 to November 16, 2014, the financial industry spent more than $1 billion on campaign contributions and lobbying, which is even more than they spent when financial reform was being considered in 2010.

Wall Street has a broad agenda, much of it aimed at repealing or dialing back important economic safeguards created by Dodd-Frank. But at least some of their influence is aimed squarely at weakening the Consumer Financial Protection Bureau (CFPB).

The CFPB was proposed by Elizabeth Warren, and created by Congress in the face of extraordinary Wall Street opposition, pushed along by an enormous coalition of public interest, religious, and consumer protection groups.

Before its creation, consumer financial protection was an “orphan mission” – no federal agency was directly in charge of looking after consumers, and no agency took the role seriously. [PDF] Consumers suffered badly for it. For evidence, one needs to look no further than the treatment of homeowners and homebuyers pre-2008, treatment that played a role in bringing America’s economy to its knees, and helped lead to nearly nearly 4 million foreclosures. From 2005 to 2007, mortgage fraud alone may have cost Americans $112 billion.[PDF]

Now that the CFPB is up and running, we’re starting to get a sense of what consumers really face every day in the finance world. Over the last two years, we’ve produced several reports at Frontier Group that review the complaints the agency has logged in its public consumer complaint database to document the minefield consumers face every day in dealing with banks, credit card companies, debt collectors and the like.

And the CFPB has taken action to stop many of the worst abuses, including by:

• Stopping credit card companies from “luring in consumers with offers of reduced or zero interest for a specific purchase or balances transferred from another credit card, and then hitting them with surprise interest charges.”
• Busting scammers for tricking “thousands of [military] servicemembers into paying fees for legal protections servicemembers already had.”
• Stopping banks from “illegally blocking borrowers’ attempts to save their homes.”

The list goes on and on. After just three years of operation, the CFPB’s enforcement actions have “resulted in $4.6 billion in relief for roughly 15 million consumers harmed by illegal practices.”

A weakened CFPB would be a return to the days of minimal accountability around some of the most important transactions consumers make over the course of their lives: buying a home, sending a kid to college, or getting out of debt. Perhaps that is why Wall Street is trying to sneak changes into unrelated legislation, and is wielding its clout behind the scenes, “slowly and methodically, piece by piece, leveraging the legislative process.”

The protections consumers gained with the creation of the CFPB are new, but deeply important. In the battle over the CFPB, if Wall Street wins, consumers stand to lose – not just money, but financial security, and confidence in the financial marketplace.