“It turns up being a joke…in a sick, sad kind of way.”
As Americans return to their desks from the Thanksgiving holiday, they are learning about a tragic comedy that is indeed playing out in Washington D.C. Two people claim to run the federal agency devoted to protecting consumers from predatory financial products. With apologies to my college history professor, it’s like there’s a leader in Rome, and one in Avignon. Who knows? They may arm wrestle over the desk in the big corner office at the Consumer Financial Protection Bureau.
The joke, of course, is on us for letting things get to this point.
I know a lot about that happened. Ten years ago, I published Gotcha Capitalism, my years-long quest to uncover and explain the hidden fees that rip off American consumers every day. The book was really a tale about the destruction of our free market economy, and the proliferation of unfair, deceptive, and toxic products that tricked consumers into bad deals. Elizabeth Warren, famous then mostly for her book called The Two-Income Trap, helped me explain the tricks and traps of credit cards and mortgages. The book caught fire, largely because Americans were fed up with getting ripped off in tiny but painful ways, what I called “death by a thousand fees.”
The book came out right as America was about to nearly destroy itself, and the global economy right along with it.
Since then, I’ve reported on the millions of consumers who lost their homes, and millions more stuck in terrible mortgages. I’ve written about the painful birthing of financial reform, and ultimate creation of Warren’s brainchild, the Consumer Financial Protection Bureau. There’s been massive credit card reform, improvements in private student lending practices, and a rule that requires financial advisers to act in their clients’ best interests.
There was progress. At a snail’s pace, certainly, but progress rarely comes quickly. Nor does it move forward in a straight line. It would seem especially foolish, however, to turn the clock back 10 years and make the country – perhaps, the world – go through another Great Recession.
As I get ready to publish a new, 10th Anniversary edition of Gotcha Capitalism in December, that’s precisely the path we are on. All the progress from the past 10 years is under a gathering threat. Bubbles have been re-inflated. Rights are slipping away. Most important, Washington is once again leading us where the banks want to go.
The “Avignon Pope” in my analogy is President Donald Trump’s pick to run the consumer agency, Mick Mulvaney. He once called the bureau a sick, sad joke. He and his supporters believe that financial institutions were not the cause, but rather the victim, of the housing bubble. They are sticking up for the big guy. They think student loan lenders need more rights to harass debtors, that financial advisers shouldn’t have to act in clients’ best interests, that fine print which tricks consumers into waiving their legal rights is preferable, and they are fighting hard to preserve lenders’ ability to change consumers 1,000% interest rates. The lawyer who wrote the White House opinion saying the president has the right to pick an interim director represented a payday lender who’d been in a legal battle with the CFPB…last year.
Here we go again.
“I did not anticipate that one decade after the financial crisis the federal government would already regard the financial industry as the victims of the episode,” said New York Times reporter Binyamin Appelbaum. “I felt confident it would take at least a generation.”
Here’s the truth. Banks don’t need a federal agency defending them. They make nearly $50 billion every quarter, and keep setting record profits. They have millions to spend on lobbying; their friends crawl up and down the halls of the U.S. Capitol, and they spend billions on marketing. They have a big voice. You don’t.
Still, banks have about a half-dozen agencies designed to “protect” them, anyway. Any of you ever complained to the Office of the Comptroller of the Currency and gotten results? That’s because the OCC’s priority is safety and soundness…of banks, not people.
So, after banks ran the planet into the ground in 2008, we finally saw fit to balance the scales a little and create an agency that represents consumers first. For the first time, consumer who felt they’d been screwed by an overdraft fee or some trick student loan form had a single place to call for help. So far, more than a million people have done so. More than 28 million have received some kind of redress as a result. That’s the CFPB.
If you think a $200 billion industry needs to be protected from the CFPB…if you think the CFPB vs. banks is an unfair fight for the banks.. you are more naive than I can even imagine.
I *have* interviewed people who work at smaller banks who feel like the CFPB has made their lives harder, and that makes sense. There is more paperwork, there are more audits. Most important, consumer complaints can no longer be ignored. They must now be addressed. That takes time. Larger banks are better suited to absorb that hit. Perhaps this process can be streamlined. Of course, not all complaints are valid; some are frivolous. I’m sure that’s a pain.
One small bank employee I talked with summed up this issue very neatly for me, however. She contacted me to be critical of the bureau, and spent a lot of time telling me how much trouble it caused. But at the end of our chat, she offered this revealing commentary.
If she had a problem with a bank, she’d definitely file a complaint with the CFPB. Hey, it gets quick results, she said.
So, there you have it. This is very much a “who’s side are you on” moment. Do you stand with banks, or with people?
If the CFPB is tamed by payday lenders, student lenders, Wall Street, and banks earning record profits, I assure you, the joke will be on us.