The Shriver Brief : Poverty Law Commentary & Insights : Sargent Shriver National Center on Poverty Law : Affordable Housing, Healthcare Reform

The Consumer Financial Protection Bureau (CFPB) has been hard at work despite some lawmakers’ efforts to block the confirmation of Richard Cordray, President Obama’s nomination as director of the CFPB. The CFPB has rolled out a series of Know Before You Owe topics in order to best hear consumer complaints, answer concerns, and make appropriate policy changes. First the CFPB recently published a report on consumer credit card complaint data. 

The report summarizes information collected from the first three months of the CFPB’s Consumer Response office’s complaint system. When the CFPB officially launched in July of this year, its Consumer Response office’s first focus was on credit card inquiries and complaints. Consumers were encouraged to submit inquiries and complaints to the CFPB in a variety of consumer-friendly manners, including by mail, fax, telephone and the CFPB’s website. The CFPB’s call centers, for example, provide services for the hearing- and speech-impaired and can assist consumers in 191 different languages. Through these mechanisms the CFPB received over 5,000 comments on credit card issues. The data collected will inform the CFPB’s future enforcement, rulemaking, research, and consumer education efforts. 

Although the majority of the comments resulted in the CFPB providing general feedback and informational resources; the CFPB also sent 84% of these concerns directly to credit card issuers to resolve and/or and respond to consumers. Thus far, credit card issuers have reported full or partial resolution of 74% of them. There were a wide range of complaint topics, however, the top five concerns related to:

1. billing disputes (13.4%);
2. APR or interest rates (11%);
3. identity theft/fraud/embezzlement (10.8%);
4. other (8.9%); and
5. closing/cancelling an account (4.8%).

As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act the CFPB was given authority to enforce the CARD Act. The CARD Act, which was signed into law by President Obama in May 2009, was designed to be a “credit card bill of rights” intended to end interest rate hikes, hidden fees, and other abusive practices in the credit card industry 

The CFPB also recently held a conference marking the one-year anniversary of the enactment of the CARD Act that included presentations and reports on the credit card industry’s progress in complying with the Act. This progress, however, is mixed. Overdraft fees have virtually disappeared in the credit card industry. Similarly, prior to the CARD Act, approximately 15 percent of credit card accounts were re-priced over the course of a year; today that number is under 2 percent. Yet, while only one of the nine major credit card issuers has a usual practice of periodically reviewing the APR on existing accounts and raising interest rates for new purchases, five others have increased, or plan to increase, interest rates on new purchases for customers who are delinquent on past balances. 

On another front, the CFPB is currently seeking consumer comments on mortgage application forms. Presently the forms to apply for a mortgage are very complicated. The CFPB has created a prototype of a simpler credit card agreement that clearly spells out the terms for the consumer. Use of the form is not mandatory; however, the CFPB hopes that financial institutions will adopt it. The public is being encouraged to visit the mortgage section of the CFPB’s website and compare two versions of a mortgage disclosure form the CFPB has developed that describes loan terms and closing costs. Consumers can choose which one is easier to read and that they prefer. Consumers can also compare the proposed form to their mortgage company’s current forms.

Clearly, the CFPB is working hard to protect consumers from predatory lending and deceptive practices, as well as actively hearing and responding to public comments. We only wish that the Senate would be as responsive and listen to the public’s desire to have Cordray’s nomination confirmed so that the CFPB can continue and expand this good work.

Learn more about the findings of the surveys included in the CARD Act: One Year Later conference.

Learn more about the Cordray nomination proceeding.

• Email This
• Print
• Comments
• Trackbacks

The 44 Republican Senators who are continuing to hold former Ohio attorney general Richard Cordray's confirmation as Director of the Consumer Financial Protection Bureau (CFPB) hostage are not negotiating. Although the CFPB has been up and running since July 21, 2011, bipartisan fighting has been going on for much longer, and seems likely to continue. In September the Senate blocked Cordray’s confirmation, and last week most Republican senators, including Illinois Senator Mark Kirk, blocked it again in a 53-45 vote.

Without a director, the CFPB cannot "exercise its full power" and fully protect American consumers from predatory lenders and other fraudulent financial products. These Republicans know it and are taking advantage of this fact. Unless and until a director is confirmed the CFPB is not able to:

• prohibit unfair, deceptive, or abusive acts;
• write rules related to model credit disclosure forms;
• define which larger non-bank financial institutions should be supervised by the agency; and
• examine or enforce laws against non-bank financial institutions such as all mortgage-related businesses, along with payday lenders, student lenders and other large non-bank financial companies.

But some legislators are insisting that the bureau first be stripped of its independence and be subject to an annual budget process sensitive to financial industry influence that is sure to slash its ability to effectively protect consumers from unsafe products and practices. Many of these senators are the same ones who send a letter refusing to confirm any nominee, regardless of his or her qualifications, unless the structure of the CFPB is changed to disperse its power and weaken its director’s role. Specifically, the letter demanded that instead of a single director there should be a board overseeing the CFPB, the CFPB should be subject to the Congressional appropriations process, and that there should be a safety-and-soundness check by the prudential financial regulators, who oversee the safety and soundness of financial institutions, on any regulations issued by the CFPB. These are the same restrictions that conservatives had originally wanted in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), but were unable to get passed.

In mid-October, a group of 37 bipartisan attorneys general came together to support Cordray’s nomination, and they confirmed their support right before yesterday’s vote. Although they do not all agree on the Dodd-Frank Act, they do believe that Cordray is highly qualified to serve as the director of the CFPB. Moreover, they indicated that coordination between the attorneys general and the federal government is critical, a point driven home by the economic injustice protests around the country. Twenty-seven Democratic members of the House Financial Services Committee also released a letter sent to Senate Minority Leader Mitch McConnell (R-KY) calling for him to agree to a vote of the full Senate on the nomination of Cordray as Director of the CFPB. Other groups, such as the American Sustainable Business Council (ASBC), a growing coalition of responsible and sustainable businesses that sent a letter to the full Senate on behalf of more than a hundred businesses and business networks, have also called for the rapid confirmation of Cordray.  

Before the vote was scheduled, Sen. Scott Brown (R-MA) also broke from his party to endorse Cordray. This is not the first time Sen. Brown has made a break from party lines; he also broke with his party on the Dodd-Frank Act vote, and his vote (one of just three Republican votes) helped push it through. He did withhold his vote, however, until he had secured highly targeted legislative favors for hometown banking giant State Street. 

Thus, it is not necessarily impossible that that some senators may change their minds. As the House letter to McConnell said, it is “unfathomable that any federal legislator would stand in the way of ensuring comprehensive protections for military families, the elderly and all Americans.” But, so far, this is exactly what is happening, and Cordray’s nomination is still being held hostage.

• Email This
• Print
• Comments
• Trackbacks

Partisan politics are alive and well in Washington. The fate of the Consumer Financial Protection Bureau (CFPB) is being held hostage by 44 Republican senators who won't budge until they get their way.  

The CFPB was established by the Dodd-Frank Wall Street Reform Act to provide oversight of and enforce laws about the consumer financial market. Although President Obama nominated former Ohio Attornery General Richard Cordray to be the CFPB’s Director of the CFPB earlier this summer, the agency officially opened its doors July 21, 2011, without a confirmed director. Yet, without a director the CFPB cannot fully protect consumers since, by statute, it cannot enforce laws against “non-bank financial intuitions such as pay day lenders” and other members of the predatory fringe financial markets until a director has been confirmed.

Last Tuesday, during Cordray’s nomination hearing, the ranking Republican on the Senate Banking panel, Senator Richard Shelby, called the hearing "premature," saying that the panel shouldn't be considering any nominee until Democrats take their demands for accountability more seriously. Republicans are blocking Cordray's nomination not because of his credentials, but rather as part of a power play with the White House. Even before Cordray’s nomination, 44 Republican senators sent the President a letter stating that they refused to vote for anyone to become the Director unless they get what they want --- restructuring of the CFPB to make it less powerful.

Illinois Senator Mark Kirk is among the 44 senators opposing Cordray's nomination. Kirk was also one of only six senators who supported legislation to repeal the Dodd-Frank Act in its entirety, as well as  bills to create a board structure for the CFPB instead of a single-director structure. Obviously Kirk is neither listening to his constituents nor looking out for their financial well-being. According to a recent AARP and Center for Responsible Lending poll, 74 % of all respondents (including 73% Independents and 68% Republicans) responded affirmatively that they support having a single agency with the mission of protecting consumers from financial companies.

Richard Cordray is caught in the middle of these outlandish political tactics. As a result, the American people are not getting the protection from financial markets that they should be getting and that the Dodd-Frank Act requires. As Representative Barney Frank, a Massachusetts Democrat who was one of the chief authors of the law that created the bureau, explained, Republican opposition is the legislative equivalent of an “arsonist having set a fire and objecting to a building’s inhabitants using the fire exit.”

During the confirmation hearing Senator Bob Corker, a Tennessee Republican, said that his big opposition to the CFPB is that there's no way to challenge a decision by the consumer bureau, unless a particular rule "threatens the stability of the financial system." Under current law the bureau can be overturned by a two-thirds vote of a panel of financial regulators if any of its regulations threaten the stability of the financial system, which Corker called a "high hurdle." When asked by Senator Corker if Cordray thought that veto power over the bureau's decisions was a high hurdle, Cordray replied "It is a high hurdle, but not an inappropriate one." Consumer advocates agree.

The Shriver Center, along with Woodstock Institute and Illinois PIRG, issued a joint statement prior to the hearing explaining that a strong, independent agency is needed because banking regulators were more concerned about the health of financial firms than about consumer abuses, such as subprime mortgages, in the years leading up to the housing market crash. As the groups stated: “If Senate Republicans fail to vote for Cordray … it will prove that they still favor a flawed financial system over ordinary Americans … and [is] another indication that they are willing to resort to extortion … to get their way even to the detriment of a fair financial system and the still fragile economic recovery.”

It’s beyond time that politicians stop focusing on their agendas and start keeping their constituents’ needs in sight instead.

• Email This
• Print
• Comments
• Trackbacks

Consumers and advocates had better beware. Last year, in response to the harmful financial practices that caused unforgettable pain to millions of families across the country, Congress passed comprehensive financial reform and consumer protection legislation.

Central among these reforms was the creation of a new agency, the Consumer Financial Protection Bureau (CFPB). Previously, enacting consumer protections rules, performing compliance reviews, and enforcement activities were conducted by multiple federal agencies, each of whom failed horribly at their jobs. Under the CFPB, all consumer protections laws would, for the first time, be the sole focus of one federal agency with the power to actually make consumer protection a priority.  

The CFPB is supposed to be up and running by July 1^st, but Congress, in its infinite attempts to please and protect Wall Street, is attempting to eviscerate the CFPB before it even becomes functional. Specifically, several bills have been introduced that, if passed, would substantially undermine the CFPB’s ability to stop abusive financial practices. 

H.R. 1315, which was approved in the House Financial Services Committee by a vote of 35-22, would allow a simple majority of bank regulators and others on the Financial Services Oversight Council (FSOC) to veto CFPB rules they deem to be “inconsistent with safe and sound operations of financial institutions.” In other words, the very banking regulators who failed to fulfill their roles as consumer advocates before would have the ability to stop the CFPB from doing the same job that they refused to do. This vague “deemed to be inconsistent” standard will certainly be used by these agencies to stop any consumer protection measures that might affect the profitability of financial institutions.

H.R. 1121, which also passed in the House by a vote of 33-24, would alter the leadership structure of the CFPB from that of a single director to a five-member commission. Thus, instead of one agency solely focused on consumers, there would be multiple agencies whose priorities are split between protecting consumers and pleasing financial institutions. The CFPB already faces unprecedented restrictions on its powers. For instance, nowhere else in federal law can one set of regulators—in this case two-thirds of the members of the FSOC—veto the actions of another agency. The amount of funding provided to the CFPB is capped, a statutory limit imposed on no other financial regulator, and the CFPB is the only financial regulator that must comply with the federal Regulatory Flexibility Act, which allows small businesses to see proposed rules before the public does, adding months to the already lengthy rulemaking process.

Finally, H.R. 1667, approved by a 32-26 House vote, would require that the CFPB’s Director be confirmed by the Senate before the CFPB could exercise its authorities. This follows a letter from 44 Senate Republicans stating their intent not to confirm any CFPB director until the legislative reforms weakening the CFPB have been adopted.

As the Consumer Federation of America’s press statement in response to the Republican senators’ letter stated: “Enactment of these measures would virtually guarantee that the CFPB would be a weak and timid agency without the will or ability to curb the kind of financial abuses that caused the nation’s worst financial crisis since the Great Depression.”

To prevent another economic disaster and stop banking regulators from throwing consumers under the bus once again, the CFPB’s authority and autonomy must be safeguarded. Attempts to weaken it will just return us to the status quo. And isn’t that how we got into this mess in the first place?

Call or send a message to your legislators today urging them not to support these bills. The Switchboard's number is 202.224.3121. The operator can connect you to your legislator's office.

This blog post was coauthored by Ji Won Kim.

• Email This
• Print
• Comments
• Trackbacks

On June 30, the Senate passed the Wall Street Reform and Consumer Protection Act, which is designed to address the regulatory weaknesses blamed for the 2008 financial crisis and to protect consumers from future abuses by the financial services industry. The bill, popularly known as the Dodd-Frank bill, has finally made its way to President Obama’s desk after a year of debate, passing into law one of the largest financial reform overhauls in history since the Great Depression.

Ambitious in its scope, the 2,300 page bill will transform the way banks, credit rating agencies, and other financial institutions operate. Some of the major overhauls include: 

• Creating a financial oversight council that will monitor bank holding companies with assets over $50 billion, as well as non-bank financial companies the council deems a systemic risk to financial stability.
• Giving the Treasury Department authority to appoint the Federal Deposit Insurance Corporation (FDIC) as receiver of any financial company to deal with “too big to fail” entities.
• Merging the Office of Thrift Supervision (OTS) into the Office of the Comptroller of Currency (OCC).
• Requiring large hedge and private equity funds to register with the Securities and Exchange Commission (SEC), thus including them within federal oversight for the first time.
• Creating the Federal Insurance Office, which will monitor all aspects of the insurance industry and identify regulatory gaps that could lead to systemic risk for the industry and consumers.
• Changing the capitalization requirements of bank holding companies, including the establishment of counter-cyclical capital and leverage requirements so that the amount of capital required to be maintained by a company increases in times of economic expansion and decreases in times of economic contraction.
• Enacting rules to ban proprietary trading, holding or obtaining an interest in a hedge fund or private equity fund.
• Subjecting derivative markets to federal regulation and oversight for the first time.
• Requiring that every public company provide for non-binding shareholder votes on executive compensation.
• Authorizing the Treasury Department to establish progress standards for financial institutions that make an effort to provide alternatives to payday loans.
• Reducing the amount of the Troubled Asset Relief Program (TARP) from $700 billion to $475 billion.
• Enacting mortgage and anti-predatory lending reforms, including good-faith determination of a consumer’s ability to repay a loan, prohibition on steering incentives, limitations on high-cost mortgages, and appraisal requirements.
  

The centerpiece of the bill is the establishment of the new, independent Consumer Financial Protection Bureau (CFPB) with only one job: protecting consumers who buy financial products at banks and non-bank lenders, from mortgage companies to payday lenders.

The CFPB will have the authority to write and enforce consumer protection rules for banks and non-bank financial firms to ensure consumers are protected from unfair or abusive practices. Additionally, the CFPB will have the ability to examine banks and credit unions with greater than $10 billion in assets, all mortgage-related business (e.g., lenders, servicers, mortgage bankers) and large non-bank financial businesses (e.g., payday lenders, debt collectors and consumer reporting agencies).

This legislation is a victory for the Obama Administration and advocates for reform across the country, including the Shriver Center, who have been pushing for oversight since before the collapse of the housing market. Despite heavy lobbying from financial institutions against oversight and regulation, this bill demonstrates a commitment to protect Main Street from Wall Street abuses.These fundamental changes to the financial regulatory system, critical to protect Americans' financial well-being, will become law when the president signs the bill today. The Shriver Center applauds Congress and will continue working to help implement the new legislation. 

Susan Ritacca coauthored this article.

• Email This
• Print
• Comments
• Trackbacks

The most recent season of NBC’s Biggest Loser just ended. Rather than waiting for next season, viewing audiences can watch a rip-off of the show right now. The new show, The Biggest Loser: American Consumers, features real Americans who have lost their financial security due to the current economic meltdown.

In the real Biggest Loser contestants vie to see who can lose the most weight, but in the American Consumer version the contestants have already lost their money.

The real Biggest Loser season always begins with contestants’ previous unhealthy diet and lifestyles being replaced with healthy foods and reduced portion sizes. The American Consumer version is the same. Instead of being force feed diets of huge portions of subprime mortgages, mortgage-backed securities, credit default swaps and predatory loans that were sautéed in a reduction of regulatory oversight sauce and served with a side of wilted consumer protection laws, consumers will receive solid financial products garnished with pro-consumer policies. They’ll even get dessert – a sundae bar from which the consumers can create their own sundaes of jobs, savings, investments and retirement accounts, complete with whipped cream and a cherry on top.

While real Biggest Loser contestants are forced to endure grueling, back-breaking, marathon workout sessions designed by their trainers, American consumer contestants will be the ones conducting “workout sessions.” During these workout sessions, or interrogations, the contestants will question the financial regulators, such as the Federal Reserve Board, the Office of the Comptroller of Currency, the Office of Thrift Supervision, the Federal Finance Agency, and the Securities and Exchange Commission, whose job it was to ensure consumer protections. Instead of the contestants being kicked off because they are below the yellow line in weight loss, regulators who failed to do their consumer protection duties will be eliminated each week.

Since we already know that none of the regulators actually protected consumers, and therefore will be kicked off, the last few shows will be special episodes. The most anticipated of these final episodes is the “Financial Products Safety Commission.” In this special episode the American consumers get to create a plan for a new federal agency committed to ensuring that the financial system places people before profits. Viewers call-in votes, rallies, support letters and voices will help determine the winning plan. Numerous guest stars are already scheduled to appear including: Elizabeth Warren, the chair of the TARP task force who first noted that Americans toasters have more consumer protections than their mortgages; Illinois Sen. Dick Durbin who already drafted proposed legislation that would create such a financial product safety commission; and a myriad of former bankers singing “Bye Bye American Pie.”

At the end of this star studded spectacular finale, the Biggest Loser: American Consumer’s grand prize will be awarded: financial stability for all Americans.

So check your local TV listings and don’t miss an episode of what will be the most exciting reality TV series yet.

• Email This
• Print
• Comments
• Trackbacks