What should be done to stop banks like Wells Fargo from scamming us?

Image via Peg Hunter (CC BY-NC 2.0) / Cropped from original

Wells Fargo’s CEO John Stumpf deserves every bit of the anger that the Senate Banking Committee directed at him for leading Wells Fargo while it created more than 2 million fake deposit and credit-card accounts, and then charged unknowing customers for them.

Stumpf has tried to lay the blame at the feet of workers. But this was not the behavior of a few out-of-control workers. The problem was systematic, and it followed from Wells Fargo’s use of high-stakes sales quotas for its employees. As the Los Angeles City Attorney’s office explained in its lawsuit, these quotas were often impossible to fulfill, and yet employees who fell short were often fired.

But Wells Fargo’s failure points to a broader problem. After all, this is hardly the first time Wells has faced scrutiny for illegal acts. As Senator Sherrod Brown (D-OH) pointed out, this is only one of 39 enforcement actions that Wells has faced in the last ten years.

Wells Fargo has racked up over $10 billion in fines for offenses from racial discrimination in mortgage lending, tomortgage fraud, to violations of the Americans with Disabilities Act.

So what should be done to stop banks from scamming us? Americans for Financial Reform has five specific proposals.

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Wells Fargo execs should not profit from the company’s misdeeds

Last week, we learned from an important joint enforcement action by the CFPB, OCC and Los Angeles City Attorney that Wells Fargo had opened accounts for 2 million customers without their consent. Bank employees had been pressured to do so by aggressive sales quotas that could not be met through actual sales. This week, we are appalled by the further news that the executive who oversaw the unit responsible for this fraud was not fired, and in fact is retiring with nearly $125 million in compensation.

Regulators have a tool in front of them to make it harder for bank executives to get away with giant pay packages in cases of lawbreaking and abuse. Section 956 of Dodd-Frank and Section 39 of the Federal Deposit Insurance Act give the watchdogs a mandate to stop banks from rewarding executives for practices designed to produce short-term gains with long-term risks. The regulatory agencies should exercise their existing authority to compel banks to use pay-clawback mechanisms, and they should make sure the final rule implementing Section 956 requires banks to take back pay from executives who oversee lawbreaking. In addition, the CFPB and OCC should refer their findings to the Department of Justice for a full investigation.

In the meantime, it is important that the penalties resulting from the illegal activity at Wells fall on the executives responsible for putting an abusive system in place and allowing it to continue. Wells Fargo and its CEO John Stumpf should claw back the $125 million going to the company’s head of consumer banking, Carrie Tolstedt, who supervised the employees directly engaged in these illegal acts. The company should also recover the bonuses received by Stumpf himself during the time period covered by the abuses. This money should be used to pay the penalties and refunds.cfp

On the CFPB’s Fifth Birthday, Senator Warren Celebrates the Bureau’s Achievements

EW woo hoo freeze frame

This week, the Consumer Financial Protection Bureau (CFPB) turns five years old. AFR and a large number of consumer, civil rights, and community-based groups celebrated the anniversary, noting that life is better for American families and neighborhoods because the CFPB is at work fighting predatory lending and financial abuse. In addition to winning the praise of advocates, recent polling has shown that there is overwhelming, bipartisan support by the public for the work of the Bureau.

Senator Elizabeth Warren also delivered her own accolades to the Bureau in a video message that stresses the importance of its good work. In it, she notes that in just five short years, the CFPB has “ returned over $11 billion to consumers who were cheated on their mortgages, credit cards, checking accounts, and other financial products.”


Americans for Financial Reform is a nonpartisan coalition of over 200 organizations fighting for a safer and fairer financial system. To learn more, join our email list!

Understanding the SAFE Act

Payday lenders may seem to be everywhere, but they were not always there. The first payday stores opened in the early 1990s – a byproduct of the same anything-goes deregulatory mania that led to a wave of booby-trapped mortgages and the financial and economic meltdown of 2008.

Almost as soon as they appeared on the scene, faith leaders and consumer and civil rights advocates called for rules to rein in the abuses of an industry whose business model is to advertise a form of “help” that consistently makes things worse, trapping people in long-term high-cost debt and imposing more economic distress on communities.

After a quarter of a century, these efforts are making progress. Fourteen states have meaningful regulations and the first nationwide rules are being developed by the Consumer Financial Protection Bureau (CFPB), the new agency established after the 2008 crisis to bring basic standards of fairness to the financial marketplace.

But the industry is also pressing ahead, employing new loan models and a battery of technological and legal ploys intended to skirt the rules, both existing and anticipated.

Senator Jeff Merkley D-Ore.), a longtime champion of consumer rights, has introduced legislation to address some of these evasive maneuvers. His Stopping Abuse and Fraud in Electronic Lending (SAFE) Act would make it easier to uphold the interest-rate caps and other measures taken by the states. Merkley’s bill would also bolster the effectiveness of the Consumer Bureau’s efforts to require payday-style consumer lenders to do what other lenders do: verify a borrower’s ability to repay before a loan can be issued.

One big problem, for the CFPB as well as the states, is the fact that more and more payday lenders now do business online. Some companies hide from view, using anonymous domain registrations and websites with no physical contact information. Others, while describing themselves as payday lenders, turn out to be “lead generators” who collect personal information and then auction it off to lenders and other marketers. It is very hard to take legal action against criminals who have encased themselves in online camouflage. It gets even harder when they claim to be doing business from overseas or from Native American reservations in order to assert tribal-sovereignty privileges.

Online or out on the street, the basic formula is the same. These lenders charge triple-digit interest rates (nearly 400% on average) and are prepared to issue a loan as long as they can gain access to someone’s bank account – regardless of whether the borrower can actually afford the loan. Their standard, in other words, is the ability to collect, not to repay. In fact, while the industry promotes its products as short-term loans, most of its profits come from people who remain on the hook for months at a stretch and often end up paying more in fees than they borrowed in the first place.

Those who borrow online face special perils. They are often required to provide personal and financial information in loan applications – data that may be bought and sold by unregulated lead generators, loan brokers, lenders, and others. In some cases, this information is used to defraud people two or three times over.

Senator Merkley’s bill seeks to address these problems in three ways – by helping consumers regain control of their own bank accounts; by establishing standards of transparency for online lenders; and by cracking down on lead generators and other third-party predators. More specifically, the SAFE Act would require banks and other lenders to abide by the rules of the states where they do business; prevent third parties from using remotely created checks (RCCs) to withdraw money without an account-holder’s express pre-authorization; prohibit overdraft fees on prepaid cards issued by payday lenders in order to gain access to consumers’ funds and pile on extra charges; and ban lead generators and anonymous lending.

The great majority of Americans, regardless of political party, favor strong action to end the scourge of abusive payday, car-title, and other high-cost, debt-trap consumer loans. By supporting the SAFE Act and standing up for the complementary efforts of the states and the CFPB, members of Congress can heed this loud, bipartisan call from their constituents.

— Gynnie Robnett

Robnett is Payday Campaign Director at Americans for Financial Reform. This piece was originally published on The Hill’s Congress Blog.

Scott Tuckers payday-loan scam spotlights industry-wide lending abuses

You can learn a lot about payday lending from the story of Scott Tucker, the race car driver who stands accused, along with his attorney, of bilking 4.5 million people out of a combined $2 billion.

Their criminal indictment, announced by the U.S. Attorney’s Office for the Southern District of New York, grew out of an investigation launched by the Federal Trade Commission in 2012. Hundreds of pages of court documents from that inquiry have now been unsealed, thanks to a lawsuit filed by Public Justice on behalf of Americans for Financial Reform. As a result, we know a great deal about how Tucker’s operation worked.

People who borrowed money from his companies, which had names like Ameriloan, OneClickCash and USFastCash, were led to believe they would be responsible for repaying the principal plus a one-time finance charge of 30 percent. But as the FTC alleged and a federal court in Nevada subsequently agreed, borrowers got routed onto a much costlier path once they had signed over access to their bank accounts.

Technically, there were three repayment options. That fact, however – along with the procedure for choosing one over another – was buried in a tangle of tiny hyperlinks and check-boxes on the company’s website. And customer service representatives were explicitly told not to explain any of this clearly.

Nearly all borrowers, like it or not, were defaulted into the so-called renewal option, which began with a series of “renewal fees” costing 30 percent of the original amount borrowed. With each fee payment, borrowers would incur another renewal fee of 30 percent of the principal. Four payments later, they would wake up to discover that they had paid back 120 percent of the original amount – without putting a dent in the balance. By these means, someone who had taken out a $500 loan would end up making nearly $2,000 in payments!

The unsealed documents include transcripts of angry phone calls in which borrowers either refused to continue paying or said they couldn’t afford to do so. Tucker’s companies responded, as the transcripts show, with a variety of illegal loan collection practices, including warnings that nonpayment could lead to arrest.

Unsurprisingly, there were many complaints and at least a few investigations at the state level. For years, however, Tucker’s companies successfully hid behind an assertion of tribal sovereignty based on their false claim to have turned over ownership and management powers to tribal governments in Oklahoma. Courts in several states with strong usury laws dismissed enforcement actions against Tucker’s companies based on the sham tribal-sovereignty claim. In fact, the documents reveal, the tribes received only a tiny portion of the companies’ revenues for letting Tucker make use of their sovereignty, while Tucker kept close reins on the lending capital, staff and management.

Some aspects of the case were particular to Tucker’s companies. It is certainly not every payday lender who uses the money made by fleecing people to finance a sportscar racing career. But in much of what Tucker is alleged to have done, he was drawing on the basic payday industry playbook of loanshark-style fees and rates, bait-and-switch marketing, automatic bank withdrawals and convoluted schemes to avoid state laws.

The standard payday loan is marketed as a one-time quick fix for those facing a cash crunch. But the typical borrower ends up in a very long series of loans – 10 on average – incurring extra fees each time out. Car-title and payday installment lenders play variations on the same theme: A high proportion of their customers remain on the hook for months or even years, making payment after payment without significantly diminishing the principal. And these are the borrowers who make the loans profitable: We are talking about an industry, in other words, whose business model is to trap people in a cycle of debt.

Tucker has been put out of business – that is one big thing that sets him apart. Thanks to the efforts of the FTC and the Department of Justice, with investigative assistance from the IRS and the FBI, he faces fraud and racketeering charges carrying penalties as long as 20 years in prison.

The industry as a whole, however, is going strong across much of the country. Although these loans are prohibited or highly restricted in about a third of states, there are more payday lending storefronts in the U.S. than Starbucks and McDonalds combined. Triple-digit-interest consumer lenders are a particularly big presence in low-income communities and communities of color – communities still reeling, in many cases, from the financial crisis and aftereffects of a wave of high-cost, booby-trapped mortgage loans.

But the problem is not a hopeless one. The Consumer Financial Protection Bureau, the agency conceived by Sen. Elizabeth Warren and created by the Dodd-Frank reforms of 2010, has already drafted and begun to implement rules to guard against a resurgence of deceptive and unsustainable mortgage lending. Now it is working on rules to rein in the abusive practices of payday, car-title and payday installment lending.

The key principle should be the same: Small-dollar consumer lenders, like mortgage lenders, should be required to issue sound and straightforward loans that people can afford to repay.

Across party lines, Americans support that simple concept. By insisting on a strong ability-to-repay standard, the Consumer Financial Protection Bureau can help bring an end to a quarter-century-long wave of debt-trap.

—  Gynnie Robnett and Gabriel Hopkins

Gynnie Robnett directs the payday lending campaign at Americans for Financial Reform.

Gabriel Hopkins is the Thornton-Robb Attorney at Public Justice.

This post was originally published on US News.com.

The Real Wolves of Wall Street

It’s hard to make a serious argument against an agency that’s returned over $11 billion to more than 25 million Americans scammed by their financial companies. Especially when that agency, the Consumer Financial Protection Bureau, enjoys broad public support across party lines for its efforts to crack down on debt-trap loans, credit card overcharges, illegal debt collection practices and discriminatory auto lending.

That’s why the big bank lobby and its allies in Congress had to contort themselves last week to justify their attempts to hamstring the bureau. Luckily for the rest of us, their farfetched talking points didn’t sway the bureau’s defenders in Congress, and their attack fell flat.

The House Financial Services Committee was considering legislation to change the way the CFPB is led, putting it under a five-member commission – a recipe for partisan gridlock and increased industry influence – instead of a single director. The White House, along with more than 75 consumer groups, spoke out against the move. The major architects of financial reform, including Sen. Chris Dodd, D-Conn., and Rep. Barney Frank, D-Mass., as well as Sen. Elizabeth Warren, also a Massachusetts Democrat, and former Rep. Brad Miller, D-N.C., made it clear that they too opposed it.

While the bill ended up passing, as expected, it did so essentially along party lines. Only two Democrats, Reps. David Scott of Georgia and Kyrsten Sinema of Arizona, voted in favor with all the committee’s Republicans – despite a major effort by Wall Street lobbyists. For weeks, they’d been telling reporters about a supposed wave of mounting support for their “bipartisan” measure, getting congressional allies like Rep. Tom Emmer, R-Minn., to spread the word in the press.

The very obvious intent of their proposal is to impede the consumer bureau’s ability to fight against abusive financial practices. To distract attention from this inconvenient truth, the bill’s defenders resorted to scaremongering. House Financial Services Committee Chairman Jeb Hensarling of Texas equated single-director leadership with North Korea, while Rep. Sean Duffy, R-Wis., called it “the Stalin model.” Both failed to mention that it was Republicans who called for a single director to head the Federal Housing Finance Agency, created in 2008, or that another bank regulator, the Office of Comptroller of the Currency, has functioned with a single director since 1863 with no calls from Congress to change it.

In the effort to gain support beyond the ranks of the usual Wall Street-friendly suspects, a few of the bill’s proponents even professed to be looking out for consumers’ interests to protect them from a hypothetical weak consumer bureau director appointed by a hypothetical future president. No actual consumer advocates have ever expressed such a concern, however: They know that an effective director some of the time is far better than a milquetoast commission all of the time.

The real impetus for this legislation comes, very obviously, from the financial industry lobby, which wants the change because it will make it easier for banks, payday lenders and debt collectors to engage in unfair, deceptive and abusive practices. And the industry is willing to spend huge amounts of campaign and lobbying money to get its way.

In 2010, Wall Street expended over $1 million a day seeking to block reforms, including the creation of the consumer bureau. That extraordinary rate of spending has continued, according to an Americans for Financial Reform report that covered the 2014 election cycle. A more recent report from the consumer advocacy organization Allied Progress shows that eight members of the House Financial Services Committee received donations from the payday lending industry within weeks of endorsing a previous attempt to subject the consumer bureau to rule by commission.

Last week, six major banking industry lobbyists did us all a favor by signing their names to a joint op-edopenly advocating for the commission bill. They claimed that they, too, were worried about what might happen, under continued single-director leadership, to “the [consumer bureau]’s work over the past four years.” Hearing that absurd argument from the leaders of trade associations that have opposed the bureau on issue after issue over the past four years made it clearer than ever that the push for a commission is just another piece of the industry’s strategy to roll back reform and revert to the unregulated havoc that brought us the financial crisis.

Warren put it best, telling The Huffington Post, “Give me a break – this is the wolves saying all they care about is Grandma.”

Of course, they won’t give us a break. The wolves of Wall Street will keep on trying to obstruct the consumer bureau’s important work in any way they think they can. But now more people will understand what’s at stake, and we can expect more people in and out of Congress to speak out and fight hard when this bill moves to the House floor and if and when it advances any further.

— Jim Lardner

Originally published on USNews.com

CFPB Stands up for Servicemembers by Stopping Financial Company Abuses

Over the last few months, the CFPB announced enforcement actions against two companies that repeatedly targeted servicemembers with abusive products. The first company, Fort Knox National, and its subsidiary, Military Assistance Company, charged servicemembers recurring hidden fees by abusing a payment system many servicemembers use send money home or pay creditors while deployed.  This process, known as the military allotment system, deducts payments directly from earnings. In this case, it also allowed the company to charge repeated, undisclosed fees to servicemembers’ accounts. The company also made it extraordinarily difficult to learn of these fees: online account information did not include fee charges, and monthly statements were not distributed.  As a result, tens of thousands of servicemember accounts were drained of millions of dollars in fees. The CFPB is now requiring the company to pay $3.1 million in relief to the people they harmed, as well as to stop its deceptive practices.

The CFPB also brought an enforcement action against Security National Automotive Acceptance Company, an auto lender, for illegally threatening current and former servicemembers in order to collect debts. The CFPB is charging the company exaggerated the potential disciplinary action that servicemembers could face after failing to pay their loans; contacted and threatened to contact commanding officers to encourage repayments, threatened to garnish wages, and threatened borrowers with legal action. The Bureau’s lawsuit charges that the company violated the Dodd-Frank Act prohibitions on unfair, deceptive and abusive practices and it is seeking financial penalties, an injunction from further abuses and compensation for victims.

Because servicemembers and their families receive steady paychecks and have unique financial challenges such as lengthy deployments and frequent moves, they are all too often the target of predatory lenders and other financial fraudsters that congregate outside military bases.

With these two actions, the CFPB has now brought six enforcement cases against companies that have violated servicemembers rights.  Those and other enforcement actions can be seen here. To date, more than 100,000 servicemembers have been helped by the Bureau’s work to protect servicemembers from financial abuse and the companies responsible have been hit with fines and restitution charges of over $100 million total.

For more on the CFPB’s work to help servicemembers, see this fact sheet.

— Rebecca Thiess

CFPB Takes on Payment Processors for Facilitating Fraud

The CFPB recently brought legal action against a number of companies, including Universal Debt & Payment Solutions, for defrauding consumers by using threats, deception, and harassment to collect “phantom debts” that the consumers did not owe to the collectors or, in most instances, to anyone else.   In this instance, consumers collectively paid millions of dollars to the debt collectors after being subject to illegal threats and false statements, including threats of arrest or wage garnishment.  In some cases, the phony collectors took money out of consumers’ accounts without any authorization at all.

In a noteworthy move, the  CFPB’s complaint named not only the debt collectors, but also the various companies alleged to have been “service providers” to the debt collectors—those serving as payment processors, without whom the scammers could not have collected the consumer’s debit and credit card payments. With this enforcement, the CFPB is insisting that payment processors—and not just the companies directly dealing with consumers—are also subject to its enforcement authority under the Consumer Financial Protection Act (CFPA).

The Bureau’s complaint charges that while the debt collectors in this case were guilty of threatening and intimidating consumers over debts that were falsely claimed to be owed, the payment processors were also in the wrong for their role in facilitating the debt collectors’ actions in this scheme—ignoring clear signs that the collectors were committing fraud.

In one example that the complaint highlights, two payment processors, Global Payments and Pathfinder, ignored extremely high chargeback rates.  (‘Chargebacks’ occur after a consumer successfully disputes a charge as unauthorized or otherwise improper and the payment is reversed.)  Chargebacks are rare in legitimate card transactions, and every chargeback requires an inquiry.  The major debt collection company in this suit as well as an affiliate had chargeback rates of close to 30% in some months, rates that should have prompted termination of the processing agreement.  Another payment processor, EMS, ignored complaints from consumers who reported unauthorized payments taken out of their accounts and fraud detection reports that flagged the collectors because there was “[n]othing found to confirm the existence of the business.”

The CFPB’s actions in this case are in some ways similar to steps the Department of Justice has taken though Operation Choke Point, where the DOJ is holding banks responsible for processing payments despite evidence of fraud or other illegal activity.  All three DOJ cases filed as part of Operation Choke Point are instances – like this one – in which the banks or payment processors in question knowingly facilitated illegal activity that did serious harm to consumers.  See this new fact sheet from NCLC outlining the three cases brought by the Department of Justice, against CommerceWest Bank, Plaza Bank, and Four Oaks Bank & Trust.  Banks and payment processors that comply with their responsibilities to know their customers and look out for signs of fraud, as most do, play important roles in safeguarding consumers.  Actions by the CFPB and DOJ against banks and payment processors who enable fraud are critical to cut off fraudsters from access to the payment system.

— Rebecca Thiess

Big Finance’s Ploy to Keep Consumers in the Dark

The Consumer Financial Protection Bureau recently announced a plan to significantly expand the information that consumers can choose to make public when they file complaints. The bureau currently takes complaints involving credit cards, student loans, mortgages and checking accounts (among other financial products and services), posting a record of the company name and complaint category in each case. If the new plan goes forward, its public database will begin to include individual stories as well, minus identifying information.

The financial industry has let us know just how much it dislikes this proposal: enough to misrepresent it through and through.

The bureau has plainly said that it will continue forwarding every complaint to the appropriate company and giving the company 15 days to respond before a complaint is published. In addition, the bureau is now proposing to give both parties a chance to tell their stories, with the company’s account posted directly alongside the consumer’s.

You would never know this, however, from the massive media campaign launched on Monday by the Financial Services Roundtable, the trade association of the nation’s biggest banks, insurance, asset management, finance and credit card companies. In a blitz of public statements, blog posts, social media messages and attack ads on the walls of the Washington Metro system, the Roundtable paints a menacing picture of “bureaucrats” posting baseless complaints and giving companies “little opportunity to respond,” so that, as Roundtable CEO Tim Pawlenty wrongly put it, people see “only one side of the story.” The Roundtable has created an entire mini-website based on this falsehood.

What’s going on here? Were Pawlenty & Co. in such a rush to denounce the proposal that they forgot to read it? More likely, they’re playing fast and loose with the truth because they would rather not come right out and say that what they really object to is the whole idea of a public database where people can learn about specific consumer grievances and how they’ve been addressed by the companies the Roundtable represents.

The Consumer Bureau (the target of this and many previous industry attacks) is the agency originally proposed by Elizabeth Warren in 2007, and formally established by the Dodd-Frank financial reform law of 2010. Its mission is to bring basic standards of safety and transparency to a market that had become notorious for its abusive practices – practices that imposed huge hidden costs on consumers, besides contributing to the financial crisis of 2008 and the economic meltdown that followed.

The complaint system provides the bureau with valuable real-world insights to apply in its rule-making, supervision and enforcement. By making some of the data public, the bureau hopes to empower consumers and, at the same time, to inspire companies to seriously investigate and respond to complaints, since it would be impractical for the bureau to investigate them all. (There were 113,000 filed last year.)

That system is already making a difference. The bureau’s Office of Consumer Response has received more than 400,000 complaints since it got up and running in 2012. More than 30,000 consumers have gotten monetary relief. Tens of thousands more cases have been resolved by other forms of remedial action.

But the complaint database has the potential to be far more effective if, as consumer groups have long urged, it includes a record of the specific problems that consumers have encountered, and the specific ways in which companies have dealt with those problems. This additional information will make it easier for consumers to spread the word about unfair practices, to compare competing companies and products, and to avoid dangers and pitfalls. It will help spur a virtuous cycle in which more people decide to use the system, and their contributions make it more useful still.

Financial companies also stand to benefit from the ability to compare their experiences with those of competitors, spot opportunities for improvement, and correct problems before they get out of control, the way bad mortgage lending did in the runup to the financial crisis.

For now, though, the industry seems to be stuck on a course of no-holds-barred opposition, and willing to traffic in multiple untruths in service of the cause. The Roundtable would have us believe, for example, that the “vast majority” of complaints filed with the bureau are totally unfounded and thus unworthy of publication. Its evidence? The fact that 70 percent of last year’s complaints “were closed with a simple explanation or clarification.”

Several large factual problems lurk inside this assertion. First of all, a “simple explanation or clarification” can be just what a consumer wants and needs; take the case of someone struggling with a mortgage and trying to find out what can be done to avoid foreclosure.

The use of the word “closed” is misleading in its own right. As the Consumer Bureau admits, its ability to follow up on individual complaints is limited. Cases can be closed without any investigation or adjudication by the agency; and they can be closed with a simple explanation or clarification essentially because that’s what the company saw fit to do. By no means does “closed” equate with resolved, as the industry implies.

Legitimate issues are often raised in complaints even if they involve no clear violation of law. The bureau has already drawn on the complaint database to identify worrisome patterns of conduct in credit card, debt collection, mortgage servicing and other areas, sometimes leading to proposals for new rules or procedures to make the financial marketplace safer.

In its ads, the Roundtable suggests that there is something extraordinary or unprecedented about having a government agency publish consumer complaints. That, too, is inaccurate; the Consumer Bureau is proposing a system that resembles, among other existing databases, one on product safety maintained by the Consumer Product Safety Commission.

The financial industry will probably not stir a great wave of public sympathy with its attacks on this proposal. Then again, public sympathy is not what it’s after. The sympathy it seeks is from lawmakers and regulators, and we can be sure it has other techniques – both cruder and more artful – for reaching them. We’re talking about an industry that (as documented in a new report from Americans for Financial Reform) spends about $1.5 million a day on campaign contributions and lobbying, leaving aside the cost of such ancillary activities as the Roundtable’s ad campaign.

So we can depend on the financial lobby to go all-out in its effort to derail the Consumer Bureau’s plan. That means that others must work equally hard to keep this worthy proposal on track.

– Jim Lardner

Originally published on USNews.com

Paying Off for Consumers – the CFPB Is Getting the Job Done

Getting credit card companies to cough up more than $1.8 billion in refunds to consumers they had cheated. Directing mortgage lenders to limit charges and stop making loans that borrowers can’t afford. Cracking down on “last dollar” scams that collect up-front fees from financially desperate people for help that is never actually delivered. Establishing a consumer complaint database to track financial market trends and help consumers get individual problems addressed

All that and more is the doing, so far, of the Consumer Financial Protection Bureau, which was created just four years ago by the Dodd-Frank financial reform law, and could not begin to wield its authority until a year after that.

The idea for such an agency was put forward in 2007 by then-professor (now Senator) Elizabeth Warren. At the time, as she pointed out, consumer protection in the financial marketplace was a responsibility scattered across multiple agencies, and treated by none as a priority. Key regulators lost sight not only of consumer safety but of systemic safety too, tolerating and even encouraging many of the reckless and deceptive practices that fueled the financial and economic meltdown of 2008.

The big banks and financial companies opposed the bureau as a concept, and they don’t much care for the reality, either. From the start, the bureau has been the target of ferocious attacks from industry lobbyists and their too many friends on Capitol Hill, who have concocted a series of bogus controversies in an effort to depict the agency as out of control.

What it all boils down to is that, unlike some of the watchdogs the financial industry has faced in the past, the bureau has been energetically doing the job it was meant to do: bringing basic standards of safety and transparency to the markets for credit cards, mortgages, student loans, auto loans, checking accounts, debt collection and other common financial products and services.

The bureau has the authority to write rules, supervise a broad range of financial companies, carry out enforcement actions, educate consumers and analyze relevant patterns of industry behavior. In its work to date, it has made fruitful use of all these powers.

In the mortgage market, for example, the bureau has issued rules that discourage high fees and deceptively structured loans, in addition to requiring verification of every borrower’s ability to repay before a loan can be issued. Its new rules, which took effect in January, hold the potential to help save borrowers and the economy from another wave of dangerous and unsustainable lending.

The bureau has also taken a number of noteworthy enforcement actions, producing refunds and fines of more than $4.8 billion so far. These actions, often coming on the heels of multi-agency investigations, have targeted illegal kickbacks for mortgage referrals, unfair billing practices and deceptive telemarketing and sales tactics, among other offenses. More than 15 million consumers have received some restitution, while countless others have benefited from settlement provisions requiring companies to change their practices and from the deterrent effect of serious enforcement.

Another important bureau accomplishment has been to create a complaint system and database where consumers can go with problems involving credit cardsstudent loansbank accounts and servicesdebt collection and more. The agency’s Office of Consumer Response has already received more than 400,000 consumer complaints. Besides helping consumers get monetary relief (such as refunded fees) and non-monetary relief (such as errors fixed on credit reports or an end to harassing phone calls from debt collectors), the complaint system provides the bureau with a reservoir of precious information. Complaints can help highlight repeat problems or law-breaking, and identify important gaps in consumer understanding, letting the agency know where it needs to focus its educational, supervisory, enforcement or rulemaking efforts to improve specific markets, products or practices. Members of the public can use the complaint data both to evaluate different companies and to find out if their personal experiences reflect a wider pattern.

By law, the Consumer Financial Protection Bureau has a special duty to protect seniors, students and military personnel. In its efforts to fulfill that mandate, the bureau has released important reports on student lending and set up an online tool called “Paying for College,” which makes it easier for people to compare financial aid options and figure out a successful repayment strategy. Its Office of Older Americans has gone after scammers who prey on senior citizens. Its Office of Servicemember Affairs has worked with other agencies to add extra protections for military personnel in rules and enforcement actions involving mortgages, payday loans, student loans and debt collection.

In its short life, the bureau has already done much to vindicate the trust of the hundreds of consumer, civil rights, labor, faith and other groups that banded together to insist that such an agency be part of the Dodd-Frank package. But it’s just a start. Plenty of important work lies ahead on payday loans, student loans, prepaid cards and debt collection, among other trouble zones of the financial marketplace. And as the agency takes on industry self-interest in these areas, it will continue to face intense opposition from those in the financial world and from legislators under their sway.

new poll commissioned by Americans for Financial Reform and the Center for Responsible Lending shows overwhelming, bipartisan support for the concept of an agency focused on protecting financial consumers and cracking down on deceptive and abusive practices.

Now it’s important to raise public awareness of this still-young agency, so more people can benefit from its complaint system, educational tools and other resources – and so the voices of the many who value the bureau’s work can continue to be louder than the voices of the few who want it to go away.

– Rebecca Thiess

Originally published on USNews.com