The House of Representatives plans to vote this week on the so-called “Consumer Financial Protection and Soundness Improvement Act” (HR 3193). This bill is a gift to the worst elements of Wall Street and the financial industry, whose tricks and traps cost American families tens of billions of dollars a year. If enacted into law, HR 3193 would invite a resurgence of the abusive and deceptive lending that was one of the leading causes of the financial crisis that nearly capsized the U.S. economy five-and-a-half years ago.
HR 3193 would achieve this result by undermining one of the key achievements of financial reform: the creation of a strong, politically independent, reliably funded Consumer Financial Protection Bureau (CFPB) to guard against unfair and dangerous practices in the markets for mortgage loans, credit cards, student loans, and other common financial products.
In its short life, the CFPB has moved to rid the mortgage market of loans designed to self-destruct; shielded service members and military families against predatory payday loans and other abuses; begun to hold auto lenders responsible for kickback arrangements that jack up the price of credit for borrowers based on the color of their skin; gone after sham companies that collect up-front fees from desperate people for debt-settlement services that are never actually delivered; and put money back in the pockets of millions of defrauded consumers, including nearly $800 million in refunds for abusive and unfair credit-card add-on products.
Introduced by Representative Sean Duffy (R-Wisc.), HR 3193 is mostly a combination of bills approved late last year by the House Financial Services Committee. It would, among other things:
- Replace the CFPB’s single director with a commission chosen by party leaders – a recipe for gridlock and ineffectuality;
- Eliminate its guaranteed funding, making the Consumer Bureau (unlike other financial regulators) subject to the congressional appropriations process;
- Curtail its access to the data needed to police the markets it is charged with overseeing, again in ways that do not apply to other agencies; and
Make it easier for a panel of traditional bank regulators to exercise their already-unique authority to overturn CFPB rules.
Separately and together, these provisions would make it impossible for the CFPB to do the job it was set up to: standing up for the public in the consumer financial markets.
Supporters of HR 3193 portray the CFPB as a menacing bureaucracy handing down burdensome rules. That’s an argument that mirrors the claims of payday lenders and others trying to escape regulatory scrutiny, but one that enjoys remarkably little support among the general public.
In fact, the demand for the CFPB’s work is clear. In addition to the millions who have benefited from its legal actions, its online complaint system has been used by nearly 300,000 consumers to report (and, in a substantial number of cases, get redress for) problems involving mortgages, payday loans, unfair and harassing debt collection practices, and unaffordable student loans, among other issues. In January alone, the CFPB received more than 30,000 calls and handled more than 20,000 formal complaints.
According to a nationwide telephone survey of likely voters conducted last summer by Lake Research Partners for the Center for Responsible Lending and Americans for Financial Reform, 67 percent of Republicans, along with 89 percent of Democrats and 76 percent of Independents, approve of the stepped-up regulation of mortgage brokers, payday lenders, debt collectors and other previously unregulated industry players that the CFPB oversees. Asked to choose between two opposing views of the CFPB, 64 percent of those surveyed saw a need for an agency charged with protecting consumers against dangerous financial products. Only 26 percent were more inclined to regard the Consumer Bureau as an expensive, unneeded federal bureaucracy.
The question raised by this legislation, then, is: whose side are House members on? Why do so many of them seem so determined to weaken the first-ever federal agency with a mandate to prioritize fairness and transparency over short term financial-industry profits? These are questions that supporters of 3193 should now be asked.
CONTACT: Jim Lardner, Americans for Financial Reform