Opinion – The Attack on the CFPB Threatens Consumers and Ignites a Race to the Bottom

Source: Roll Call

Mick Mulvaney once co-sponsored a bill to abolish the Consumer Financial Protection Bureau. And since being appointed by President Donald Trump to temporarily lead the agency, he has worked to cripple it from the inside.

What he is doing will hurt consumers not once but twice — first, by letting off the hook financial institutions that take advantage of their customers, and second, by giving other companies large incentives to do the same.

In its first six years, the CFPB has handled more than 1.2 million complaints and delivered almost $12 billion in relief to nearly 30 million consumers. It has put in place new protections against payday lending, investigated predatory payday lenders, fought mortgage servicers for wrongful foreclosures, established new mortgage standards to protect homebuyers, and required lenders to verify that borrowers have the means to repay their loans. It also banned financial institutions from using arbitration clauses to deny consumers the right to sue, took action against companies for illegal collection of student loan debt, ordered Wells Fargo to pay full restitution to customers for opening accounts without their consent, enforced the Credit Cardholders’ Bill of Rights, published a public database of consumer complaints, and established extensive educational materials on financial products for consumers.

Sen. Elizabeth Warren, D-Mass., who was the driving force behind the CFPB’s creation, has pointed out that we shouldn’t put people in charge of agencies they want to destroy. That seems self-evident — unless the specific goal is to destroy it.

Soon after his appointment, Mulvaney began weakening and radically changing the CFPB, stating that part of the agency’s new core mission statement would be to deregulate financial products by “regularly identifying and addressing outdated, unnecessary or unduly burdensome regulations.”

He has zealously pursued this new mission by putting a freeze on the implementation of all new rules, delaying long-planned rules to protect users of prepaid cards, halting the agency’s investigation of Equifax for failing to protect customers’ private information, weakening rules against predatory payday lenders, and pulling the plug on a suit against payday lenders that charged annualized interest rates of up to 950 percent. Mulvaney is trying to politicize the agency by placing political appointees in positions normally staffed by nonpartisan civil servants. He also tried to starve the agency by requesting zero operating funds for the second quarter of fiscal 2018.

The rollbacks won’t just hurt consumers, they will also hurt our economy. Fair regulations that protect consumers are essential for well-functioning markets. Without effective rules, we’ve seen that some companies will cheat their customers. As word spreads, millions of consumers are forced to question whether products are safe or secure. This uncertainty leads them to buy less. Many businesses — even those that treat their customers fairly — lose sales. The economy suffers.

One would think that deregulators like Mulvaney would have learned a lesson from the 2007-2008 financial meltdown, which threw our economy into a devastating recession. At the root of the crisis were the many lenders who convinced American consumers to purchase mortgages they could not afford, including the infamous NINJA loans to those with “no income, no job and no assets.” At first, companies that sold these predatory loans were on the outskirts of the industry, but when regulators failed to step in to protect consumers, many reputable companies that feared being left off the gravy train jumped in.

The mountain of subprime mortgages, sold and repackaged as securities presumably to eliminate risk, turned out to be a house of cards, resulting in what former Federal Reserve Chairman Ben Bernanke called “the worst financial crisis in global history, including the Great Depression.” Millions of Americans lost their jobs or their homes. It took nine years for the economy to fully recover.

Fair regulations that are enforced rigorously are critical not only to protect consumers, but because they are essential for markets to work efficiently. Deliberate efforts to undermine the CFPB will not only prove to be a raw deal for millions of Americans but can cause lasting damage to our economy.

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