It’s difficult to find a government agency that’s met the kind of challenges the Consumer Financial Protection Bureau has – not to mention made significant, permanent and realistic changes for the American consumer. Let’s face it, our elected leaders can’t even manage to balance a budget or agree on what to have for lunch. Still, CFPB, which is celebrating its first year has made progress in areas that few believed was possible.
So why are politicians blaming the agency for slow lending trends? Before we delve into that, take a look at a few of the accomplishments the bureau has under its belt in just twelve short months.
Wasting No Time
The impressive Capital One ruling earlier in July that resulted in fines totaling $210 million, with $140 million going straight into the pockets of consumers. Following the announcement last week, Cordray said,
We know these deceptive marketing tactics for credit card add-on products are not unique…and all financial institutions are on notice about these prohibited practices and reinforces that they must make sure their service providers are complying with the law.
The bureau has put into place a consumer credit card complaint database, which it then wasted no time in following up on all of them – every single one. It was announced earlier this year that both student loans and mortgage lenders will soon have their own databases, which is sure to empower Americans everywhere.
It’s currently juggling several measures directed at those who prey on the nation’s poorest, including payday loans and the new – and expensive – loan products for college students.
GOP Demands
The House Oversight and Government Reform committee recently dragged CFPB director Richard Cordray to Capital Hill with demands to justify his reasons for not reining in banks and credit card companies and making them loosen their lending requirements. It boggles the mind to know that these elected officials will, first, allow bipartisanship and stubborn pride be their guiding force, but also to expect answers – with a straight face – as to why this agency hasn’t overhauled the entire financial sector.
The short answer is it’s not CFPB’s job. It wasn’t designed to do the “dirty work” of bankers and politicians; indeed, its sole purpose is to protect consumers. If its mission was to babysit bank presidents and members of Congress, it would surely have a name that didn’t include the words ‘consumer financial protection bureau’.
Exactly One Year
Fortunately, Cordray had the fortitude for a calm and definitive reply. He defended his agency and reminded the committee that the CFPB has had exactly one year of complete regulatory power. He also explained that these tighter rules have been in place since the subprime mortgage scandal and resulting recession. Banks and credit card companies have every right, within reason, to conduct their business as each sees fit. Finally, he said that there have been rules put into place and they’re moving through the political channel, which as the committee is well aware, moves at is own slow pace. He assured the members once it made it through the red tape, his agency was prepared to implement them.
But then he got down to the proverbial “meat and potatoes”. He went into the difficulties his agency has faced from none other than the lawmakers he was now testifying in front of. Referring to it as “demands from lawmakers opposed to the CFPB”, he then brought it full circle. It was around this time Representative Elijah Cummings, a Maryland Democrat, said,
I think that it’s very difficult to blame his office for the credit crunch that we find ourselves in… I think he’s doing a great job.
It’s important to note, too, that despite the bureau’s one year anniversary, Cordray has only been in office since January. President Obama’s administration put into place an acting director. Many may recall the initial focus was only consumer credit card complaints.
A spokesperson for the bureau said,
we are working on several mortgage-related rules to implement our supervisory program…and this includes two relating to the Bureau’s Know Before You Owe mortgage disclosure integration project and setting forth new protections for high-cost mortgages. The Bureau is publishing today a final rule regarding the Bureau’s supervision of larger participants in the credit reporting marketplace. We are also seeking consumer input an Advance Notice of Proposed Rulemaking about the consumer general purpose reloadable prepaid card market.
Frankly, it’s a little confusing considering credit cards and automobile financing has eased its lending requirements, which begs the question, why was Cordray ordered to appear at all? It’s true mortgage lenders continue to require everything but the kitchen sink in their approval processes, but again, it was the subprime sector that played a huge role in what the nation’s faced over the past three years. Not only that, but some banks and other lenders are concerned that there may not be the traditional resources to recoup losses from foreclosures – courtesy of the government, of course.
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