Blog: Awaiting the Supreme Court Hearing, the CFPB Continues to Defend Consumers

Awaiting the Supreme Court Hearing, the CFPB Continues to Defend Consumers

By William Pierre-Louis, Jr., communications associate

Despite being in a legal fight for its very existence, the Consumer Financial Protection Bureau continues to carry out its mission to promote fairness and transparency in our financial system and ensure that consumers are protected from predatory and deceptive practices. Its ability to perform under pressure is one more reason why we need a strong CFPB.

In the fall the Supreme Court will hear a case about the constitutionality of the CFPB’s funding, the latest in a series of attacks on the agency since 2011. Wall Street, predatory lenders and their allies in Congress have never missed a chance to question or undermine the agency’s mission because it does not benefit them to have a regulatory institution scrutinizing their actions. As Sen. Elizabeth Warren put it, “the banks don’t like being forced to shut down scams. So they, and their Republican friends, attack the CFPB.”

This year, the agency has made significant strides in championing the rights of families and vulnerable consumers by tackling bank overdraft policies, reducing credit card late fees loopholes, creating a public registry that would help track fraud, and collecting data that would help make small business lending fairer. 

As these attacks intensify, the CFPB is doing precisely what it was created to do: holding the financial industry accountable for its abusive practices. The CFPB was created by the Dood-Frank Act, to oversee financial institutions, and regulate how they offer products and services to consumers. 

Since its creation, the Consumer Financial Protection Bureau’s oversights have saved consumers and working-class families a lot of money. For example, with its enforcement and supervisory efforts, the agency provided $16 billion in consumer relief through 2022 to those cheated by financial institutions.

Exploitative credit card late fees can be a significant contributing factor to the perpetual cycle of debt for the borrowers–costing families up to $12 billion each year. Individuals residing in the most economically impoverished neighborhoods in the United States incurred an average of double the total late fees paid by cardholders living in the most affluent regions, in relation to their credit card accounts, CFPB reported. 

“Over a decade ago, Congress banned excessive credit card late fees, but companies have exploited a regulatory loophole that has allowed them to escape scrutiny for charging an otherwise illegal junk fee,” CFPB Director Rohit Chopra said when proposing the measure. 

Earlier this year, the CFPB proposed closing loopholes companies exploit to hike these fees, a measure that will save consumers $9 billion. Credit card issuers have raised fees that have climbed to $30 for the first late payment and $41 for a subsequent late payment within 6 billing cycles, undermining the 2010 Federal Reserve final rules to protect credit card users. 

This year, the CFPB also published new findings highlighting how many financial institutions have charged consumers illegal junk fees on bank accounts, mortgages, and student and auto loans. For example, mortgage servicers repeatedly paid inspectors to go to the wrong address, charging consumers $10 to $50 for each visit.

During a recent hearing, House Republicans criticized the CFPB’s findings on junk fees and described overall authority as “overreach” with insufficient rulemaking and a lack of accountability. But Keith Ellison, Minnesota’s Democratic attorney general, rightly called the agency’s work a critical step towards fairness in our economy. “It is absolutely appropriate for the CFPB to regulate this,” he said

“I can tell you, attorneys general, both Democrat and Republican, do it every day. And it is part of the way that we create confidence, faith and create the ability for consumers to have a shot at prosperity.”

Recently, the Consumer Financial Protection Bureau also announced plans to establish a public registry of terms and conditions, such as waiving servicemembers’ legal protections, undermining credit reporting rights, and limiting lender liability for bank fees caused by a lender’s repeated debit attempts. 

The rule is part of the agency’s efforts to increase public transparency and to improve oversight of nonbank financial institutions flooded with terms and conditions that repeatedly undermine consumer rights. 

This registry has the potential to become a powerful tool for consumers and watchdog organizations alike to track harmful contract terms that limit customers’ legal rights and keep them from having their day in court,” said Martha Perez-Pedemonti, access to justice and consumer rights counsel for Public Citizen. 

Lastly, this year, CFPB finalized a rule to increase transparency in small business lending, promote economic development, and combat unlawful discrimination–requiring lenders to collect and report information about the small business credit applications they receive, including geographic and demographic data, lending decisions, and the price of credit. The rule will also give policymakers the necessary regulatory provisions to enforce fair lending laws and make it easier for the country’s 33 million small businesses–especially those owned by women and minorities–to access more capital opportunities without facing discrimination. 

While the CFPB’s task to defend and protect working-class families does not come without the risks of being attacked by the industry, consumers across party lines support the agency’s work on their behalf. 

A recent poll found that two-thirds of independents, three-quarters of Republicans, and over eight in ten Democrats support the CFPB. President Biden’s announcement on reducing junk fees in collaboration with the CFPB has gained significant popularity across party lines. According to a navigator survey, more than three in five independents and Republicans expressed support for Biden’s Junk Fees Prevention Act. A substantial majority of 74 percent of independents and 68 percent of Republicans also endorse the president’s proposal to decrease the caps on credit card late fees. Starting this year, the CFPB’s effort to address junk fees is projected to decrease annual late fees from $12 billion to $9 billion.

Eventually, there will be more attacks against the agency for doing its job. But despite these ongoing oppositions from the industry and potential setbacks from the Supreme Court ruling, the Consumer Financial Protection Bureau should remain vigilant in its efforts to protect vulnerable consumers from the industry’s harmful practices. The bottom line is that we need a strong CFPB to continue to crack down on the industry’s illegal and discriminatory actions – and right now, in spite of the pressure from its opponents, the CFPB is delivering.