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The White House may be in chaos. But at least Congress is addressing the issue Americans care about most: making it easier for the finance industry to rip them off.
Last week, Jeb Hensarling of Texas, chairman of the House Financial Services Committee, circulated an outline of his latest plan to repeal Dodd-Frank. This law, you may recall, was put in place after the financial crisis to reduce our chances of having another one.
The law isn’t perfect, but it did have at least one crucial, mostly popular component: It created an agency dedicated solely to helping consumers fight back when financial institutions cheat or mislead them.
This agency is called the Consumer Financial Protection Bureau. It oversees large banks, thrifts and credit unions, along with lots of companies in the “nonbank” universe, such as mortgage brokers and servicers, payday lenders, debt collectors, private student lenders and credit bureaus.
Remember when Wells Fargo got caught creating millions of fake customer accounts? The bureau helped lead that investigation, which resulted in a $185 million settlement.
The bureau has also, among other things, sued pension-advance companies that fleece veterans, and it ordered the firms that left low-income users of prepaid RushCards unable to access their own money to pay $13 million in restitution and fines.
In its five years of existence, the bureau says, it has recovered $11.7 billion for more than 27 million consumers.
The financial industry, understandably, is not keen on this independent federal agency. And neither is Hensarling, who — just coincidentally? — has received generous campaign contributions from the finance industry.
Hensarling’s leaked memo lays out updates to legislation he introduced last year (which, among other things, required that CFPB employees be paid less than their counterparts at other federal financial regulatory agencies).
Under the Orwellian section heading “Empowering Americans to Achieve Financial Independence,” the memo explains how Hensarling intends to further disempower this agency — and by extension, American consumers.
For instance, the CFPB director would become an at-will political appointee. This means that — unlike the officials who run the Federal Reserve, Federal Trade Commission or Securities and Exchange Commission — the CFPB director could be fired without cause. The bureau would cease to be an independent agency and could be pressured at any time to drop investigations of, say, friends of the president.
According to the memo, Hensarling also plans to repeal the CFPB’s supervisory powers — that is, its authority to regularly examine what’s going on inside the institutions it regulates to make sure they’re following the law.
And the bureau would no longer be allowed to punish firms that cheat customers.
Yes, no more fines and no more penalties. It’s not even clear from Hensarling’s memo that the bureau could force firms to return any money they’ve already pinched from consumers.
We don’t know exactly how the bullet points in this memo will get translated into legislation. But it seems likely that consumer protections would wind up even weaker than they were before the crisis.
That’s because Dodd-Frank took the authority to enforce some consumer protection laws away from other regulators and gave them to the newly formed CFPB. Assuming those authorities aren’t being redelegated to these other agencies — and the memo does not indicate that will happen — they’ll remain with a bureau that’s essentially powerless to enforce them.
Which brings me to the weirdest and least defensible parts of Hensarling’s plan: an effort to make consumers dumber.
Hensarling’s memo also eliminates the CFPB’s research functions, its public database of consumer complaints and even its consumer education functions. Right now, the bureau publishes educational materials on its website and partners with libraries, veterans groups and other community organizations.
It’s hard to imagine what legitimate public interest lies in killing efforts to promote financial literacy. But in the con-man economy, maybe public interest is no longer a consideration.
crampell@washpost.com
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