Home » Economy and work » Why Scrapping the CFPB Could Cost Americans Billions: Unpacking the Debate

Why Scrapping the CFPB Could Cost Americans Billions: Unpacking the Debate

Update on :
Billions of dollars for millions of Americans: why 'delete the CFPB' might not fly

In 2017, Donald Trump, then President, appointed Mick Mulvaney, the White House Budget Director, to oversee the Consumer Financial Protection Bureau (CFPB). Mulvaney, a former Republican Congressman, had notably criticized the CFPB, describing it as “a joke… in a sick, sad kind of way.”

This sentiment resurfaced when Elon Musk, recently named as a presidential advisor by Trump, suggested in a tweet from early November to “Delete CFPB,” citing the redundancy of regulatory bodies. The CFPB is also targeted in the Heritage Foundation’s Project 2025 policy document, which labels it “a highly politicized, detrimental, and completely unaccountable federal agency.”

Those who value the agency’s mission—to shield consumers from malpractices in financial products and services—find these attacks troubling. However, the CFPB has become less of a political target since its inception following the 2008 financial meltdown, based on a concept by Democratic Sen. Elizabeth Warren.

Nowadays, analysts suggest that the attitude towards such proposals as Musk’s might be met with caution, summarized as, “Delete at your own peril.”

“Looking at the tangible results, the money restored to consumers, it’s clear that the CFPB has been incredibly effective,” explained Pamela Foohey, Allen Post Professor of Law at the University of Georgia law school. “This success is consistent across various administrations, which makes it difficult to argue against,” she added.

Benefiting Consumers Through Oversight

The Consumer Financial Protection Bureau undertakes a broad range of activities to regulate the use of financial products and services by consumers. It sets rules, for instance, recent regulations aimed at curbing excessive credit card and overdraft fees. The bureau also handles consumer grievances regarding company misconduct, oversees financial markets for signs of fraud and abuse, and provides educational resources on personal finance topics like mortgages and credit cards.

See also  Strong Economy Yet Rising Credit Card Woes: Why Are Americans Struggling?

The CFPB’s most notable achievements include exposing deceptive practices such as the fake accounts scandal at Wells Fargo. It also recently imposed a fine on Navy Federal Credit Union for charging overdraft fees despite accounts not being overdrawn.

When penalties are imposed on companies, these funds are returned to the affected consumers. To date, the agency claims to have recovered over $21 billion for more than 200 million U.S. citizens.

“The CFPB stands as a current defender of the general public against big Wall Street entities and predatory lending firms,” stated Christine Chen Zinner, senior policy counsel at Americans for Financial Reform.

Bipartisan Support for the CFPB

The CFPB, despite its youth, has had its structure and funding model validated by the Supreme Court, with a notable 7-2 decision authored by conservative Justice Clarence Thomas.

Mulvaney himself maintained many of the initiatives started by his predecessor, Richard Cordray. In a 2018 Senate hearing, he acknowledged that these were “pretty good lawsuits. We were really enforcing the law and addressing wrongdoing, which we’ll keep doing under my direction.”

Jonah Crane, a partner at Klaros, a financial services advisory firm, and former advisor to Democratic Sen. Chuck Schumer on financial regulation, suggested that Republicans questioning the CFPB might confront the tangible benefits it has offered consumers. “Imagining congressional hearings filled with compelling consumer stories, it’s not an enviable position for critics,” Crane remarked. He also noted that recent ambiguous actions by the CFPB, such as suing major banks over fraud issues with the Zelle payments app, could prove controversial.

See also  Why Selling Your Home Yourself Could Be More Appealing Than You Think

“If fraud and scams persist, the resulting stories could turn quite grim, quite fast,” he warned.

There might even be potential for alignment between the populist Trump administration and the CFPB. At a December Senate Committee on Banking, Housing, and Urban Affairs hearing, current CFPB director Rohit Chopra expressed willingness to collaborate with the White House on Trump’s proposal to limit credit card interest rates.

A Unique Establishment

Contrary to Musk’s claims, the CFPB does not replicate existing functions.

“The bureau was established to fill oversight voids and to focus independently on financial services for the everyday person,” explained Chen Zinner.

“It might just appear as another checkbox, which seems intimidating,” commented Crane. “However, it was specifically designed to not be redundant. It arguably holds more direct accountability for consumer protection than any banking regulator before it.”

Direct Impact on American Consumers

In 2017, Foohey released a groundbreaking research paper exploring the CFPB’s unique interactive webpage that allows consumers to lodge complaints based on specific financial products. She observed that “consumers primarily use this feature to vent frustration about a company’s practices or to share their distress and fears about how these practices have affected their lives.”

Her paper included quotes from consumers: “I hope the CFPB can help?” and “Thank you for your time and consideration and for your commitment to ensuring that consumers are treated fairly and not taken advantage of. This means more than words can express,” another stated.

The CFPB has since received nearly 7 million complaints deemed significant enough to warrant a formal response from the implicated financial services firms.

See also  Common Social Security Blunder Could Cost Retirees Thousands!

(This story was updated to correct a typographical error.)

Similar Posts:

5/5 - (1 vote)

Leave a Comment