stake in a series of recent court rulings is the independence of the Consumer Financial Protection Bureau, an agency designed to protect everyday Americans from abusive practices in the financial marketplace.
In October, a three-judge panel of the U.S. Court of Appeals of the D.C. Circuit ruled that instead of needing good cause to remove the director of CFPB, the president must be able to remove the director at will. In response to that ruling, the CFPB filed a petition for rehearing before the full panel of the court.
Some members of Congress have questioned the need for the agency at all. However, looking back into the not-so-distant past, we can identify the circumstances that necessitated a consumer-protection agency in the first place, and why it is so important to maintain the agency as an independent regulator in the future.
In 2008, Florida — along with the rest of the country — was slammed when toxic, subprime mortgages started resetting upward, catapulting many unsuspecting homeowners into unaffordable mortgage payments. Payment defaults followed, and the subprime mortgage market collapsed. The economic tremors that followed decimated the broader financial and labor markets, ultimately leading to high unemployment and historic drains of family wealth. The Great Recession was here, and out of this crisis came the Dodd–Frank Wall Street Reform Act in 2010, providing desperately needed reforms to the financial regulatory system and empowering the creation of the CFPB as a single bureau for protecting consumers in the financial marketplace.
Since its creation in 2011, the CFPB has done incredible work to protect consumers through its rule-making authority. In direct response to the Great Recession, the agency created new mortgage rules to create transparency for consumers and address some of the worst practices that led to the mortgage crisis. It has also tackled or is in the process of addressing deception and abuses in other areas, including prepaid cards, high-cost small-dollar loans, unfair debt collection, abusive overdraft practices, and mandatory arbitration clauses.
In addition, the bureau is tasked with supervising various financial actors and taking enforcement action when violations are found. Recently in this capacity, the CFPB cracked open the practice of Wells Fargo illegally opening secret unauthorized accounts, fining them $100 million and requiring that the bank refund consumers. Before that, the CFPB forced Citibank to compensate consumers $700 million for tricking them into buying credit card “add-ons.” And in 2014, Bank of America got popped for $720 million in compensation to consumers for similar abusive practices. In between, the bureau has taken numerous smaller but equally important actions that provide relief for consumers from a variety of deceptive and unfair practices by payday lenders, for-profit colleges and servicers, debt collectors, big banks and small banks — and the list goes on.
In total, the CFPB has delivered nearly $12 billion in refunds and relief to more than 27 million consumers including homeowners, military families, students, small-dollar borrowers and other individuals in vulnerable circumstances.
The news cycle moves so rapidly, it is easy to forget yesterday’s stories that shape today’s policies. The Dodd-Frank and CFPB reforms have brought stability to what was a very volatile situation. One can argue about the burden on financial-service providers from having to adjust to new rules. However, in light of the countless practices designed to cheat consumers in the marketplace, what cannot be disputed is the need for a consumer-focused agency with the freedom and flexibility to address new and unique schemes targeting consumers as they arise. Both the D.C. Circuit and our government representatives should recognize the CFPB as the government ally consumers have needed in the face of financial adversity.