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A Midterm Lay of the Land: Consumer Protection in 2019

The 2018 election is now behind us, with a new Congress, new governors and new state legislators about to grapple with America’s biggest challenges.

Every two years, Frontier Group analysts take a step back to review the “lay of the land” on their issue areas. This is the second in a series of posts over the next several weeks reviewing the threats and opportunities facing the American people, our communities, and our environment. (Other posts in this series: 1. Health Care; 2. Global Warming)

The 2008 financial crisis threw millions of Americans into economic disarray. It also exposed a financial marketplace that was filled with minefields for consumers, such as misleading or robo-signed mortgages and illegal debt collection practices – and was a stark reminder that, when it comes to protecting consumers in the financial marketplace, federal watchdogs were too often asleep on the beat.

The crisis gave new lift to an idea that consumer advocates had been pushing for decades: a federal agency dedicated solely to protecting consumers in the financial marketplace.

Since its creation in 2011, the Consumer Financial Protection Bureau (CFPB) has proven itself to be a valuable ally to U.S. consumers. Through 2017, the CFPB secured $11.8 billion in relief for consumers affected by problems in the marketplace. [pdf] It investigated scams and enforced consumer protection laws, including imposing a $100 million fine on Wells Fargo for creating fake customer accounts. It created new consumer protection rules, including an “ability-to-repay” rule requiring mortgage lenders to determine that customers can actually repay offered loans – a reform that would likely have dampened the impact of the financial crisis.

Through its direct relationship with consumers, the CFPB has also frequently uncovered problems before they became full-blown scandals. The CFPB’s public database of more than a million consumer complaints has provided the agency and organizations like ours a valuable resource to study consumer problems.

The financial crisis taught us the importance of a well-regulated, transparent marketplace for financial consumers. Unfortunately, that is a lesson that is in the process of being unlearned by the Trump administration.

Under the Trump administration, the CFPB has been weakened and its future put at risk. The CFPB’s acting director, Mick Mulvaney, is working to limit the CFPB’s ability to create consumer protection rules. Mulvaney has also suggested that he may limit public access to the CFPB’s public database of consumer complaints – a vital source of public information and an “early warning system” for emerging scams and scandals. Under Mulvaney, the CFPB has also failed to file any new enforcement actions in court, and put its investigation into the Equifax data breach “on ice,” according to Reuters.

A similar bit of unlearning has been happening in another area of the marketplace: the market for consumer products.

In 2007, just as the financial crisis was starting to get underway, consumers were put on high alert as a record number of dangerous products were recalled, including millions of toys and children’s jewelry that contained lead paint or dangerous chemicals, and one million cribs that presented strangulation hazards.

In response, Congress passed the Consumer Product Safety Improvement Act, which dramatically strengthened the federal government’s ability to keep consumers safe, including by addressing lead and other hazardous materials, and by creating a searchable database of harm reports at www.saferproducts.gov.

The Trump administration is also threatening that progress. In an op-ed for The Hill, a former chair of the Consumer Product Safety Commission (CPSC) wrote that Trump is “decimating” the commission. For example, right before Trump’s election, the CPSC voted for rules to limit carbon monoxide emissions from portable generators, a rule that could save about 70 lives a year. Soon after, Trump appointed a new head of the CPSC - Ann Buerkle - whose first action as acting chairman of the commission was to kill the proposal.

The last couple years have seen a bleak turn for consumers – will 2019 be any better? In the short term, at least, both the CFPB and CPSC are likely to maintain their current courses. The CFPB is getting a new director – Trump’s nominee for the next five years, Kathy Kraninger, is moving swiftly through her senate nomination – but she seems likely to follow Mulvaney’s lead. And while the CPSC’s acting chairman has not been officially confirmed in her role, it is hard to imagine substantive changes taking place any time soon.

But the results of the November elections may, at least, prevent the worst possible outcomes for consumers. House Democrats have already begun to reveal their plans to protect the CFPB from new attacks. Rep. Maxine Waters, who will become Chairwoman of the House Financial Services Committee, has made protecting the CFPB a key priority, and has made it clear that she will work to block legislation designed to cripple the Bureau, like proposals to put bureau funding at the whims of congressional appropriations. And House Democrats have also pledged to open investigations into decision-making at the CFPB under Trump, which could potentially lead to more openness and better execution of the Bureau’s duties.

Important work is also taking place at the state level. At least four states have looked to create state-level “mini-CFPBs” to take on some of the consumer protection responsibilities abandoned by Mulvaney’s CFPB. While they may prove effective, the breadth and strength of the CFPB can never be truly replicated by state efforts.

While consumers should expect to keep playing defense in 2019, the progress of the last decade has also laid exciting groundwork for future progress. As I wrote last year, the CFPB’s ability to maintain a two-way flow of information with consumers through its advanced complaint database allows it to respond rapidly to individual consumer needs and wide-scale problems in the financial marketplace. And the CPSC’s ability to set strong standards and rapidly carry out recalls has almost certainly saved lives and prevented heartache.

These agencies have created a model for how to protect consumers in the 21st century – a model that leading states can continue to build upon in the next couple of years, despite the backsliding in Washington, DC. By continuing to defend and expand key consumer protections, public officials can move us closer to the day when dangerous products and exploitative practices in the financial marketplace become things of the past.

Image: Pixabay user reverent