Opinion: After 10 years, here is how the CFPB is doing in consumer protection


“Corruption, embezzlement, fraud,” Alan Greenspan, longtime chairman of the Federal Reserve once said, “are all characteristics that exist everywhere… what successful economies do is minimize. No one has ever eliminated any of this stuff.

But we keep trying, which explains one of the federal government’s new bureaucracies, the Consumer Financial Protection Bureau (CFPB), which is celebrating its 10th anniversary.

Founded in the wake of the financial crisis – and near collapse – of the US economy between 2007 and 2009, the CFPB attempts, as its name suggests, to protect consumers “against unfair, deceptive or abusive practices and to take action against companies that break the law. ”It also works to“ arm people with the information, steps and tools they need to make sound financial decisions ”.

Critics – meaning Wall Street and Republicans – have long hated the agency, accusing it and its more than 1,500 employees of having too much power and trying to tax too much. heavy regulations in the financial services sector. The criticism has been fierce from the start and has never stopped.

It is “irresponsible” and “Led by a single dictator”, said Richard Shelby, then a senator from Alabama, in 2011, the rank Republican on the banking, housing and urban affairs committee. Fast forward to 2020 when, after Joe Biden was elected, the question posed by the conservative American banker was “How far will the CFPB switch in 2021?”

Yet the industry has raked in tens of billions every year since the agency’s inception, including last year, when “Wall Street profits soared in the first half of 2020, amid the worst pandemic in a century, ” said a title from MarketWatch, for example. This year, earnings reports, a series of dividend hikes, major increases and employee bonuses further undermine the idea that the industry is suffering from the CFPB’s efforts.

Banks received more favorable treatment during President Donald Trump’s administration—he killed, for example, a CFPB ruler which made it easier for consumers to sue financial firms (firms felt it was too harsh) and sought to turn back the clock efforts to curb predatory lending. But the regulations have tightened since his departure; Three weeks ago, President Joe Biden signed a bill abolish the ability of predatory lenders to rip off their clients. Biden, through his education department, also angered lenders by writing off some $ 1.5 billion in school loans; the White House has signaled that more cancellations will likely follow.

Was the CFPB a success? Judging by its first objective – to protect consumers from unfair, deceptive or abusive practices – it is safe to say that there have been results. Some $ 14.4 billion in consumer aid and an additional $ 1.7 billion in civil penalties have been earned since the agency’s inception, according to CFPB interim director Dave Uejio.

“We have helped millions of consumers and stopped a variety of egregious practices,” Uejio said on a conference call Monday.

Most of those wins have escaped public attention, but not his two biggest wins. In 2012, the CFPB ordered the return of Capital One Bank some $ 140 million to consumers for getting them to pay for “add-ons” like payment protection and credit monitoring when they activated credit cards.

Four years later, this helped expose widespread fraud at Wells Fargo & Co., whose employees had secretly opened millions of fake bank accounts and credit cards on behalf of clients. The bank was ordered to reimburse victims who were charged fees on these phantom accounts. That fall, the bank paid $ 185 million to settle the charges against it, and the bank’s board forced CEO John Stumpf to resign and lose $ 41 million.

But that was just peanuts compared to the billion dollar fine the CFPB imposed on the bank in 2018 for conspiring to force customers into car insurance contracts and to charge fees. unfair to mortgage borrowers.

Read: Here’s what Wells Fargo did to trigger a $ 1 billion fine

Aside from these high-profile cases, Senator Elizabeth Warren (D-MA), who was instrumental in forming the CFPB, said the agency had not garnered much attention because much of his work focused on helping Americans who are less financially savvy and therefore more likely to be exploited.

“I’m particularly embarrassed by the overdraft fees, which take every penny away from struggling customers,” she said. She also highlighted predatory auto loans – the third category of household debt behind mortgages and student loans – “and the area where we are now seeing the most predatory tricks and traps, especially against consumers of color.” .

Read: Black Americans suffered most under Trump-era consumer protection agency, study finds

Also: Wells Fargo and Other Banks Charged $ 27 Million in Student Fees, CFPB Buried Report Reveals

One problem with this never-ending game of cops and thieves is that the bad guys always seem to be one step ahead. For all CFPB successes, consider the following two examples:

  • Consumers Lost Some $ 4 Billion From Internet Scams Last Year, FBI Says

  • Identity theft is on the rise. According to Aite Group, an intelligence and data provider for the financial services industry, losses suffered by Americans increased 42% in 2020 from the previous year before reaching $ 712.4 billion. This type of crime may be different from the police performer payday lenders and big banks, but it is nonetheless a financial crime and the CFPB is called, after all, the Consumer Financial Protection Bureau.

Scams are also proliferating in the largely unregulated cryptocurrency market, another area where regulators are catching up. Another government agency, the Federal Trade Commission, says that since last fall alone it has received complaints from 7,000 people who claimed to have been stolen out of some $ 80 million, an increase of about 1,000% of ‘year after year.

Of course, this is reminiscent of the second objective expressed by the CFPB: “to arm people with the information, steps and tools they need to make smart financial decisions”. I have no doubt that some of those 7,000 people and some of that $ 80 million that flew away were the result of scams. But I guess that’s also due in part to individuals making bad decisions, succumbing to greed, and everything in between.

Although well-intentioned, it is bureaucratic vanity to imagine that millions of people can easily be smart enough to manage their money better and avoid falling prey to con artists and criminals. Maybe it’s something that should start long before people start getting credit cards, taking loans, and everything in between? A report by Charles Schwab notes that “only 21 states currently require high school students to take a personal finance course.” It’s just asking for trouble on the road – the kind of trouble the CFPB is trying to eradicate.

Wall Street has deep pockets and a lot of friends in Washington. The little guy is short on both. Any government agency that tries to help the latter is OK by me.


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