Color of Money: Will consumer watchdog become a lapdog for the financial industry?
WASHINGTON -- The federal agency charged with safeguarding consumers is in jeopardy.
Richard Cordray, the director of the Consumer Financial Protection Bureau, announced last week that he's leaving by the end of the month. Cordray's departure gives President Trump an opportunity to appoint a new leader, and I'm concerned that this will derail the watchdog agency's consumer-first mission.
The CFPB was created in the wake of the 2008 financial crisis to protect consumers against predatory financial practices. It has done its job by creating or toughening rules to make sure people understand the financial products they are being sold. The agency has also created a complaint database that is an advocate for consumers looking for justice, and it's been unapologetic about its aggressiveness in going after companies and industries with deceptive practices. Think of the CFPB as a Doberman pinscher guarding your financial interest.
If I were a betting woman, I would wager a great deal of money on President Trump filling the vacancy with someone friendly to the financial industry. Trump's nominee would probably be more like a purse puppy. Think Teacup Chihuahua.
In Cordray's parting statement, he wrote that the agency has recovered $12 billion for nearly 30 million consumers.
But the GOP hasn't liked all this devotion to consumers. Just recently, Republicans overturned a CFPB rule that would have banned future mandatory arbitration clauses from financial contracts. These clauses prevent consumers from joining together in class-action lawsuits. Although the payout to individual consumers is often low, the legal actions often force companies to stop bad behavior.
Critics carp that there has been too much oversight under Cordray. The latest to cry foul are payday lenders.
How dare the CFPB rein in their highly expensive loans to poor people, the lenders complain. These companies argue that they are only helping people on the margins.
But I see the devastating results of such small-dollar loans, which often turn into a debt trap. The CFPB recently issued final rules on payday loans. At its core, the rules simply require lenders to determine upfront whether people can afford a loan and still meet basic living expenses and major financial obligations. Yet the CFPB has been vilified by payday-loan proponents for even this commonsense directive.
Even if you weren't fully aware of what the CFPB is or does, there are many people fighting for your rights who are. And they, too, are alarmed about the future of the agency. Here are some reactions to Cordray's stepping down.