Consumer Protections in Danger during the Season of Consumerism


December 4, 2015

During this holiday season, business will be booming. Companies, both on the street and online, will be catering to millions of customers spending billions of dollars. And it’s not just traditional retailers who will be getting in on the act. Banks will supply loans to help you get end-of-year deals on cars, and tech companies will try to get you to sign contracts for the latest and greatest tech gadget or service. This season is as much about consumerism as it is about Christmas.
Consumer Financial Protection Bureau

Meanwhile, unless Congress acts, in one week the government will run out of money and shut down. Once again, Congress is playing chicken with the deadline in part by loading up the omnibus spending bill with highly contentious policy riders. One such example: some in Congress want to gut protections that the Consumer Financial Protection Bureau (CFPB) provides to the consumers who are spending much of their hard-won earnings at this time of year. CFPB opponents have justified their position by saying they are helping struggling well-meaning local financial institutions. But to be clear, CFPB is not trying to curb good local lenders like the Bailey Brothers Building and Loan in It’s a Wonderful Life. It is protecting consumers from unscrupulous practices by many different kinds of lenders, debt collection agencies, and credit reporting companies. Since the Bureau’s inception, CFPB has won more than $11 billion for over 25 million Americans.

The CFPB is an independent agency dedicated to the protection of consumers (that’s you and me!) from unfair business practices. They have gone after payday loan centers that are really no better than loan sharks. These businesses loan small amounts of money to people to be paid back out of their next paycheck. A typical payday loan might include a fee of $15 per $100 borrowed, resulting in an annualized interest rate of nearly 400 percent. Their exorbitant interest rates and fees often leave unsuspecting borrowers in debt for years, having to pay back anywhere from two to five times as much (or more) as the amount they owed. The CFPB has also tackled some of the toxic mortgages that contributed to the Great Recession. No longer can banks issue loans that have no real value backing them or to people who have no hope of making their payments. As one of our blog posts earlier this year noted, the CFPB also partnered with the U.S. Department of Education to win $480 million in student debt relief for former students of the now-bankrupt Corinthian College, and it cooperated with the Federal Communications Commission to gain $100 million in refunds for customers of Verizon and Sprint who were illegally charged fees on their cell phone bills.

Now some in Congress seek to disrupt these services by attaching debilitating riders to the must-pass omnibus package. These riders endanger consumers by damaging CFPB’s independence and authority. Some proposals would substitute a panel of five people for the current director (Richard Cordray, who is doing an independent, aggressive and effective job); other possible riders would place the Bureau’s currently independent funding under the direct control of Congress, unlike other similar financial regulatory agencies, which have independent funding. Still other riders would restrict the CFPB’s ability to regulate abusive payday lending, crack down on discriminatory auto lending and abusive subprime mortgages, and go after for-profit colleges that leave students with overwhelming debt but without a job.

Consumer spending in America, for better or worse, is part of the driving force in our economy. During this time of year when so many Americans are spending so much of their money, it seems counterintuitive that Congress wants to undo protections that keep them from losing millions to lenders operating outside the law. Congress should leave the CFPB alone and fully independent by allowing no riders to be attached to the FY16 omnibus bill.

You can do your part to preserve the CFPB by telling Congress to pass a clean spending bill without harmful riders. Send your member of Congress an email, tweet at them, or write on their Facebook pages. Just click here, then share this alert via Facebook and Twitter.

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