Robert Nathan Mayer, a professor in Family Consumer Studies at the University of Utah and co-author of Financial Justice, The People’s Campaign to Stop Lender Abuse, contends that an alliance of consumer, civil rights, labor and fair-lending advocates is effectively challenging Wall Street with the creation of the Consumer Financial Protection Bureau.
What are some of the abuses the Consumer Financial Protection Bureau (CFBP) may prevent?
Most people view the bureau as a response to the lethal combination of business deception and consumer ignorance that contributed to the mortgage meltdown of 2007-2008 and the broader recession. These abuses included knowingly selling mortgages that consumers had little likelihood of being able to afford, hiding the true cost of the mortgage from consumers, and locking borrowers into unaffordable mortgages through high pre-payment penalties. The agency also was set up to address abuses outside mortgage lending, and some of these problems had simmered for more than a decade. In particular, the CFPB was given jurisdiction over a variety of nonbank services, including those offering payday loans, student loans, and services for transmitting money overseas (“remittances”). Previously, these were regulated by varying state laws —if at all.
How can this federal agency protect consumers?
First, the Dodd-Frank Act of 2010 that established the bureau requires it to study a variety of consumer problem areas and, if appropriate, issue new regulations. The CFPB has already issued (or is the processing of issuing) new rules covering consumer mortgage lenders, issuers of prepaid credit cards and debt collectors. Perhaps more important is its effort to educate consumers so they can stand up for themselves in the financial marketplace. The basic idea is that informed consumers will reward good companies with their business and withhold their business from companies offering inferior products and services. The agency is devoting special attention to the financial education of older Americans and members of the military — two groups that have a long history of being financially exploited. It also wants consumers to be more vocal. Accordingly, it has set up an online procedure for submitting complaints and blowing the whistle on illegal business practices. Go to http://www.consumerfinance.gov/.
What’s at stake if the agency were to be weakened?
Only a handful of Republicans supported the idea of a new consumer agency. Now, Republicans in the House of Representatives and a few conservative Democrats have voted to make its rules easier to overturn, changing its leadership structure from one director to five commissioners and cutting the funding it receives from the Federal Reserve. In short, in my opinion, these proposed changes would make the agency slower and more timid in advocating for consumers. The consumer’s visible “cop on the beat” would return to being a desk-bound, paper-pusher.
Explain the role of state reformers.
Most state attorneys general and consumer advocates wanted states to have the right to enact policies for their individual states that were stronger than anything the bureau might require, while financial services companies argued that they shouldn’t be subject to 50 different state laws. The Dodd-Frank Act reached a compromise that allows strong state enforcement of nationally chartered banks. Specifically, states can enforce federal statutes and their own laws as long as state actions do not prevent or significantly interfere with bank operations. In short, the hand of state consumer protection was strengthened under Dodd-Frank.
Robert Nathan Mayer, author
Co-authors Robert Nathan Mayer and Larry Kirsch will talk about their book, “Financial Justice, the People’s Campaign to Stop Lender Abuse,” at 7 p.m., June 26, at The King’s English Bookshop, 1511 S. 1500 East, Salt Lake City.
To submit a consumer complaint about a business
Go to http://www.consumerfinance.gov/.