If you've taken out a credit card, checked your credit score, purchased a home, borrowed money for college, acquired debt or wrangled with debt collectors, the Consumer Financial Protection Bureau (CFPB) is working for you. For example, on Jan. 23, the CFPB ordered CitiFinancial Servicing and CitiMortgage to pay $28.8 million for the wrong done to struggling families trying to save their homes from foreclosure. The CFPB is requiring the two servicers to pay $21.4 million to consumers who lost their homes when the firms failed to provide individuals with options to avoid foreclosure or burdened them with excessive paperwork when seeking foreclosure relief; an additional $7.4 million goes into a civil penalty fund.
Less than two weeks later, President Donald Trump issued an executive order to gut the bureau. Why? President Trump — who campaigned against Wall Street yet has named six former Goldman Sachs employees to his administration — believes there are too many regulations for banks which, in turn, led to a tightening of credit.
Yet, as the enforcement action against Citi demonstrates, a great deal of work still needs to be done to ensure that financial institutions play by the rules and that the rules they play by are fair, clear and consistent. There also should be meaningful consequences for those who don't play by the rules.
The CFPB was formed from the crucible of the 2008-2009 financial crisis which was caused by financial institutions steering consumers into predatory, unsustainable loans; perverse incentives that enabled companies to profit when mortgage loans failed; slack rules; and little government oversight or enforcement. As a result of the Great Recession, the U.S. lost 8.7 million jobs, and 5 million people lost their homes to foreclosure.
The CFPB is part of the Dodd-Frank Act which was passed by Congress to better regulate financial products and services in the wake of the financial crisis. As the bureau that oversees this task, the CFPB has improved the financial lives of millions of Americans in seven short years.
The CFPB has provided $11.1 billion in relief to more than 27 million consumers, assisted more than 1 million consumers who reached out to the CFPB with complaints, conducted research on financial products, issued new rules on mortgage products and mortgage servicing, and provided consumer education materials to inform Americans how to build wealth by making wise financial choices and avoiding predatory products and services.
Their staff also investigates and takes actions against those companies that violate laws or regulations designed to protect consumers. The CFPB is initiating enforcement actions against firms that violate consumer protection laws almost as quickly as President Trump is issuing executive orders. Since Jan. 1, the CFPB has initiated more than a dozen actions against a variety of firms, including student loan servicing giant Navient, credit reporting service Equifax, medical debt collectors, mortgage lenders, banks and pawn shops.
It is likely that CFPB's effectiveness at enforcing these rules drew the ire of Wall Street firms which, despite the new rules and regulations, continued to flout safeguards put in place to protect individuals and families from predatory products and services. Although Mr. Trump's executive order was vaguely worded, consumer advocates can read between the lines. Many fear that Mr. Trump will try to remove the CFPB's well-regarded director, Richard Cordray, a consummate professional with a keen intellect and keener sense of fairness. Even if efforts to remove Mr. Cordray fail, members of Congress who support Wall Street elites will attempt to remove the CFPB's independence and its funding. Foes of consumer protection will try to change the bureau from one with a single independent director to a commission, which will be stymied as members try to reach agreement and move forward with a consumer protection agenda. Other attempts to weaken the CFPB may include moving the bureau from one with its own independent funding source to one that requires an annual appropriation, which would lead to defunding and defanging the CFPB.
In other words, the Consumer Financial Protection Bureau is fighting to protect 99 percent of Americans from predatory products and services. Yet the 1 percent of Wall Street elites who are running our government are trying to put the agency out of business. Don't let them — we can't afford to lose the agency that is fighting for us.
Marceline White is executive director of the Maryland Consumer Rights Coalition; her email is Marceline@marylandconsumers.org.