The Consumer Financial Protection Bureau reached its fourth anniversary on July 21, and while the bureau seemingly celebrated with a host of enforcement activity, CFPB naysayers took the opportunity to take action against the agency. As has been the case since the bureau opened its doors for business in 2011, the CFPB draws controversy like flies to honey. It's been a busy week for the bureau and for legislators.
Antonakis resignation. Big news at the bureau was the resignation of Deputy Director Steven Antonakes, who has been with the CFPB since its start. Antonakes sent an email to bureau staff on July 16 stating that he would be stepping down to spend more time with family as he has been commuting from Massachusetts for years, and a CFPB spokesperson confirmed his departure. No firm date was disclosed at the time, but word from the bureau now is that Antonakes will step down at the end of this month. The bureau announced today that Meredith Fuchs will serve as acting deputy director. Fuchs announced her intention to step down as General Counsel earlier this month, but she will continue to serve as General Counsel and Acting Deputy Director until a permanent replacement is chosen for each position. Antonakes served not only as Deputy Director but as Associate Director for supervision, enforcement, and fair lending. Big shoes to fill.
Consumer complaints. The CFPB announced a new monthly complaint snapshot, the first report out on the eve of the bureau's birthday. One of the key accomplishments the CFPB has noted in papers documenting the last four years is the large amount of complaints the bureau has handled since opening its doors - more than 650,000 to date This new series adds to the CFPB’s consumer complaint tools, including its Consumer Complaint Database. Responding to consumer complaints is a "key element" of the bureau's work, CFPB Director Richard Cordray said.
Enforcement activity. Cordray said that the bureau's enforcement activity has secured more than $10 billion in relief for more than 17 million consumers. CFPB enforcement activity this past week has boosted those numbers. The CFPB and the Office of the Comptroller of the Currency brought a coordinated enforcement action against Citibank, N.A. and its subsidiaries seeking redress for their deceptive marketing, billing, and administration of debt protection and credit monitoring add-on products. The CFPB alleged that Citibank or its subsidiaries deceptively marketed these various debt protection and credit monitoring add-on products during telemarketing calls, online enrollment, and “point-of-sale” application and enrollment at retailers, or when enrolled consumers later called to cancel certain products.
In another action this week, Discover Bank and two of its affiliates—The Student Loan Corporation and Discover Products, Inc.—entered into a consent order with the CFPB to settle claims that the companies violated provisions of the Consumer Financial Protection Act of 2010 (CFPA) in connection with their student loan servicing activities that included more than 800,000 accounts acquired from Citibank. Two days later, the bureau filed a complaint against Student Financial Aid Services, Inc. for alleged illegal sales and billing practices. The bureau alleges unfair and deceptive acts or practices on the part of the company for luring in consumers with misleading information about the total cost of its subscription financial services and then charging them with undisclosed and unauthorized automatic recurring charges.
These actions come on the heels of an action last week by the CFPB and Department of Justice against American Honda Finance Corporation, the car manufacturer's consumer auto loan subsidiary, for failing to monitor the activities of dealers from which it bought loans to prevent discriminatory interest rate mark-ups. As a result, according to the bureau and DOJ, African-American, Hispanic, and Asian and Pacific Islander borrowers were charged higher interest rates on their car loans to the tune of an average of between $150 and $250 over the life of a loan.
Supporters v. distractors. Also center stage during the bureau's anniversary was the ongoing push-and-pull between bureau supporters and naysayers. On the same day as the bureau birthday, Sen. Ted Cruz (R-Texas) and Rep. John Ratcliffe (R-Texas) introduced a bill intended to make this anniversary the bureau’s final one. The bill would abolish what the lawmakers call “just another example of the cronyism that infects our nation’s capital.”
The legislators also contend that the CFPB is unaccountable to the American people because Congress does not oversee the bureau through the annual appropriations process. This “unique setup” makes for a “situation that invites regulatory excess and abuse.”
Representatives Randy Neugebauer (R-Texas), Chairman of the House Financial Institutions and Consumer Credit Subcommittee, and Roger Williams (R-Texas), member of the House Financial Services Committee, said that the CFPB is responsible for some of the most consequential regulations that are hurting economic growth and stifling opportunity for individuals and families across America. According to the legislators, the CFPB continuously issues one-size-fits-all, Washington-knows-best regulations that harm consumer choice, decreases credit availability, and increases costs across the board for consumers and hardworking businesses.
In contrast to these opinions, the Treasury Department said the bureau has had a “transformative impact, establishing and enforcing clear rules of the road for banks and nonbanks involved in a wide range of financial markets.” To prevent the kinds of predatory behavior that contributed to the 2008 financial crisis, the CFPB has issued a number of “common sense rules” strengthening the country’s mortgage market, wrote Treasury’s Rob Friedlander.
At an event sponsored by the watchdog group Better Markets, former lawmakers and Dodd-Frank architects Christopher Dodd and Barney Frank gave an inside perspective about the causes of the 2008 financial crisis, their reaction to critics of the legislation, and their concerns about efforts to roll back the reform. Dodd said that "the CFPB is an important bulwark for consumers. Before, consumer protection measures had to be passed separately. Now with the CFPB in place, it’s one-stop shopping for consumer protection,"
Other legislators chimed in to defend the bureau. For example, House Minority Leader Nancy Pelosi (D-Calif) noted the CFPB's monetary return rate to "consumers who had fallen victim to unfair and deceptive financial practices."
The U.S. PIRG Education Fund released a new webpage, “Meet the CFPB: Just Ten of the Ways It Works for You,” to celebrate and increase public awareness of the agency. The group cited the bureau's work with consumer complaints, special offices to fight discrimination, protect servicemembers, help students pay for college, and protect elders against financial abuse as well as its resources for consumers with questions about mortgages among other things.
The CFPB: active, controversial, but always relevant to the world of banking and financial services.
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