How the CFPB Helps Military Families and All of Us (Ed Mierzwinski, US PIRG)

Columnist George Will recently (and not for the first time) urged Congress to “abolish the Consumer Financial Protection Bureau.” His reasons may seem to come from his conservative philosophy, but merely pander to the powerful Wall Street interests that left our economy in ruins just a few years ago. As a counterbalance, let’s discuss some recent speeches and statements by CFPB Director Richard Cordray on his vision for the bureau and some of its current work, including – on this Veteran’s Day – its efforts to protect military families from financial predators.

As I sit here taking the usual election year phone calls from reporters (but not George Will) asking me what threats face the CFPB in the next Congress, I’ve been looking at all the work that the young agency (it just turned three) has accomplished to make financial markets work better. Rather than focusing on numbers, such as “recovered over $4.6 billion in refunds to consumers from unfair financial practices,” I quickly realized I needed to look no further than two recent major speeches given this October by its director, Richard Cordray. Each talk deserves much more discussion and consideration in the media and review by editorial writers. Perhaps they have not been reported on because they were given in Michigan; it’s an important state but Ann Arbor is not New York City, nor is East Lansing Washington, DC. After discussing those important speeches, I will comment on the CFPB’s defense of military families.

On October 10, Director Cordray gave a speech at the Michigan State University explaining in thoughtful detail why the 40th anniversary of the Equal Credit Opportunity Act should be added to the university’s “60/50” celebration of the 60th anniversary of the Supreme Court’s landmark decision in Brown v. Board of Education and the 50th anniversary of the Civil Rights Act. As Cordray points out, of course, Dr. King’s campaigns for civil rights always included a call for economic justice. In East Lansing, Cordray goes on to explain the role of the ECOA in fighting discrimination:

“For the principle of “fair lending” that underlies this statute is crucial to upholding and enforcing the kinds of economic rights that ensure freedom and equality to the people who constitute our society. One of those rights is the right to access credit on fair and equal terms – to borrow money now for repayment at a future date, so as to have the use of it for purposes of one’s own choosing. Our pursuit of happiness is enhanced when the government helps to ensure that the opportunities that free markets and fair lending make possible are available to us all.”

Later in October, at the University of Michigan Law School, he explained the consumer bureau’s enforcement strategy against four obstacles that hurt consumers in the financial marketplace. He described the “4 D’s” that harm consumers: Deceptive marketing, Debt traps, Dead end markets, and, finally, circling back to the theme of the MSU speech, Discrimination.

Deceptive Marketing: We faced an epidemic of false or misleading information in the lead-up to the financial crisis. As a result, too many homebuyers ended up with complicated mortgage products that could not be made to work, products they often did not understand. These products were doomed to fail, and chances are that if consumers had known better, they would have avoided them.[…] But cleaning up deception in the marketplace also requires some tough action. So we have adopted a number of other regulations to protect consumers in the multi-trillion-dollar mortgage market.  […] We also have taken strong enforcement actions against a growing number of credit card companies that misled millions of consumers with deceptive sales pitches.

Debt Traps: Payday lending is one area we see as a potential debt trap for consumers. We issued a report earlier this year which found that payday loans put many consumers at risk of turning what is supposed to be a short-term, emergency loan into a long-term, expensive debt burden. […]This summer, we took action against ACE Cash Express, another large payday lender, for pushing payday borrowers into a cycle of debt. And, just last month, we sued an online payday lender, the Hydra Group, which was running an illegal cash-grab scam.

Dead Ends: These problems occur in markets where consumers cannot exert their influence by “voting with their feet” – markets like debt collection, loan servicing, and credit reporting. […] […] But some debt collection practices have long been a source of frustration for many consumers, generating a heavy volume of complaints at all levels of government. […]In the credit reporting industry, we have used our authority to improve practices that will better ensure the accuracy of information contained in people’s credit reports and their ability to get errors corrected. We also are pushing hard for the Open Credit Score Initiative, which is providing tens of millions of Americans with free credit scores and raising their awareness of how they are affected by a credit reporting system that judges their creditworthiness.

Discrimination: The fourth D we are taking on, perhaps the most damaging of them all, is discrimination. The greatest challenges some consumers face are rooted in unlawful treatment based on prohibited characteristics like race or national origin. So we are seeking economic justice and the right to equal treatment in the financial marketplace based on individual merit and responsibility.”

These are important speeches, worthy of a closer read. You can find them, and other remarks by Director Cordray, here.

— Ed Mierzwinski

This piece, which is reprinted by permission of the author, was originally poublished by US PIRG.

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