Amid congratulatory messages from Democrats and consumer-advocacy groups, a key federal watchdog agency celebrated its 10th birthday July 21. But many Republicans would like to send the agency packing before it becomes a troublesome teen.
The Consumer Financial Protection Bureau, founded amid the ashes of the housing and financial turmoil of the Great Recession, marked its 10th anniversary last week, prompting a review of what it has, and hasn’t, accomplished over the past decade.
Acting director Dave Uejio, in a video, cited the “tremendous impact” the bureau has had on the consumer financial marketplace, including $14.4 billion in consumer relief secured from banks, other lenders, debt collectors and others to date.
Over the past decade, the bureau has taken action, imposed fines and secured consumer restitution from companies including Wells Fargo Bank, TD Bank and Freedom Debt Relief. The bureau also is entrusted with educating Americans about credit reports, scams and many other financial topics.
But the bureau has faced intense criticism, and many of the money problems facing Americans — student loan debts, financial illiteracy, the racial wealth gap, scams and a stagnant homeownership rate among them — arguably have gotten worse over the past decade.
While the bureau isn’t solely or even largely to blame for those problems, it also can’t claim much credit for improvements in other areas such as a general decline in many bank fees, rising credit scores and overall improvement in Americans’ net worth. Progress there can be traced at least as much to competition, low interest rates, a resilient job market and other factors in a strengthening economy.
Bureau is a political football
The Consumer Financial Protection Bureau was controversial from the start, with fault lines marked by politics. It was the brainchild of U.S. Sen. Elizabeth Warren, D-Mass. As she said in comments marking the 10th anniversary, legislation to scuttle the agency was introduced by Republicans in every session of Congress since then.
Critics have complained of too much unchecked power for the agency, government overreach, bureau directors who can’t easily be fired by presidents, secrecy, political appointees, targeting of companies based on ability to pay restitution and so on.
“The bureau operates as legislature, cop on the beat, prosecutor, judge and jury all rolled into one,” Rep. Jeb Hensarling, R-Texas, former chairman of the House Financial Services Committee, said during a 2016 hearing, recounted by Consumer Reports.
Created by the Dodd-Frank Act, the bureau is part of and funded largely by the Federal Reserve System, putting it at arm’s length from Congressional oversight. The agency and its more than 1,500 employees have an estimated budget of more than $600 million for the coming fiscal year. The bureau’s main objectives are ensuring that all consumers have access to financial products and services while making sure that those markets are fair, transparent and competitive.
Perhaps a bigger concern for bureau proponents is whether the agency is really all that impactful, especially in making a difference in the financial lives of ordinary Americans.
Of the $13.4 billion in enforcement relief obtained for consumers through 2020 (including monetary payments, canceled debts, loan reductions and so on), $9.9 billion came in just two years, 2014 and 2015. Enforcement activity largely dried up during the Trump Administrative but has rebounded a bit under President Biden. Last year, the bureau announced actions against 48 financial companies, though few of them are household names.
Filing complaints, setting expectations
Rather than policing actions, Warren said she felt the “crown jewel” of the agency are its complaint hotline and database of allegations against financial companies. Consumers can lodge complaints through the agency’s website (consumerfinance.gov), by phone (855-411-2372) and in other ways.
“It makes consumers feel empowered in some way, like they’re being heard,” said Loraine Martinez Bellamy, an attorney with the Connecticut Fair Housing Center.
The bureau said that it elicits timely feedback (responses within 60 days) from financial companies in 99% of the cases. That’s certainly worth something, though the answers aren’t always what consumers hope for.
With 87% of all complaints, cases were closed with explanations of why companies did or didn’t take the actions. With 6% of the complaints, consumers received nonmonetary relief such as having account information corrected, stopping harassment via phone calls, correcting documents issued or restoring account access. In only 3% of situations did consumers receive actual payments, debt reductions and the like.
Consumers may research complaints and track them by company, date, type of dispute, state of residence and other means. But the information is watered down, as the bureau redacts names, specific account details and sometimes more. Nor does it verify all facts, and it publishes the narrative of complaints only when consumers agree.
In addition, the bureau warns, the number of complaints lodged against a business should get weighed against the firm’s market presence. In other words, larger companies will tend to generate more complaints simply because they’re doing more business.
Credit reports and credit-repair businesses have attracted the lion’s share of disputes, followed by debt-collection practices and issues involving credit cards/prepaid cards. Consumers have reported relatively few problems with mortgage servicing, checking/savings accounts and student loans.
Financial pressures building
However, some of that likely will change.
Democratic Illinois state Sen. Jacqueline Collins, another bureau supporter, said she worries about student loans, home foreclosures and tenant evictions after special pandemic protections expire in coming weeks. She and others also cited ballooning medical debts as a growing problem, as well as credit scores and their impact on lending and insurance availability.
Warren also cited shady auto lenders, cryptocurrency fraud and bank overdraft fees as areas of concern. “There’s a lot of predatory behavior by giant banks that squeeze every last penny out of customers who are struggling,” she said.
Both critics and supporters of the bureau seem to agree on one thing: Most Americans, and even many members of the financial news media, underutilize its services.
But they’ll have another chance at that as pandemic safety nets start coming down — and debts and delinquencies likely rise, credit scores drop, and evictions and foreclosures mount.
Reach the reporter at russ.wiles@arizonarepublic.com.
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