The CFPB And Consumer Debt

The idea for the Consumer Financial Protection Bureau (CFPB) originated in a paper that Elizabeth Warren wrote in 2007 while she was a law professor at Harvard. 

She moved to Washington after Dodd-Frank passed, to help then-President Obama get CFPB up and running. She touted it as a tool to protect average people from banks behaving badly.

Obama considered naming Warren to direct the agency, but it became clear that corporate players and Republicans on the Hill wouldn’t have it. They feared she’d be too zealous a leader.

 Since 2010, the CFPB’s work has included:

•  Attacking unfair, deceptive, or abusive acts or practices by companies
• Enforcing laws that outlaw discrimination in consumer finance
• Taking consumer complaints
• Enhancing financial education
•  Monitoring financial markets for new risks to consumers

 The CFPB has had a tangible impact on consumer debt:

• $20.7 billion+: Amount of monetary compensation, principal reductions, canceled debts, and other consumer relief resulting from CFPB enforcement.
• $4.8 billion+: Civil money penalties imposed by the CFPB on companies and individuals that violate the law. Civil money penalties are deposited into the CFPB’s victims relief fund (also known as the civil penalty fund), which provides compensation to consumers who have been harmed.
• $6.1 billion: Estimated amount consumers will save every year due to recent changes in banks’ overdraft and non-sufficient funds (NSF) fee policies.  
• 22.8 million: The estimated number of people expected to have had at least one medical collection removed from their credit reports.
• 5.6 million+: Consumer complaints sent to companies for response — including 3.6 million+ complaints about credit reporting, 80,000+ complaints about medical debt collection, and 90,000+ complaints about student loans.
• 61.5 million+: Approximate number of users who have accessed answers to hundreds of common financial questions via the CFPB’s “Ask CFPB” database.

 The CFPB Today

 Thus far, the enforcement levels of the CFPB have depended on who is President. 

Wall Street and Republicans have loathed the agency from day one…..after all,  it interferes with profits and exploitation.

After Trump’s inauguration in 2017, Republicans declared all-out war on the CFPB, and introduced legislation to dismantle it.

During the Trump administration, the CFPB’s overall enforcement activity fell 80 percent. Additionally, the average monetary relief to victims fell by 96 percent.

Under Trump, the CFPB  announced only two cases enforcing the Fair Credit Reporting Act, and settled both without providing a single dollar of restitution to victims of illegal practices.

However:

After Biden’s election in 2020, the Agency picked up steam again. Its current leader is Rohit Chopra, who has focused on:

Protecting tenants behind on rent due to the pandemic from eviction

The bureau used its authority to make sure struggling tenants got assistance. 

Monitoring student loan servicers

Who denied debtors the opportunity to enroll in repayment plans that could have significantly lowered their monthly payments and set them on a path to loan cancellation.

Other illegal practices by loan servicers included failing to properly process payments, applying payments to the wrong loans or in incorrect amounts, and mishandling loans for borrowers with disabilities.

Recently the CFPB filed a proposed enforcement order against the student loan servicer Navient, formerly known as Sallie Mae, for years of failing borrowers and breaking consumer protection laws. 

The proposed order would permanently ban the company from servicing most federal student loans, and largely remove Navient from the market. 

Reforms in payday lending

Today, the average loan is relatively small — just $375, “but most borrowers end up paying more in fees than they originally got in credit,” he says. They “end up in debt for many months of the year, even though they took a loan that originally said it would be for a two-week term.” 

Uncovering abuses in medical debt

Including unlawful attempts to collect work-related medical debt from workers covered by state worker compensation laws.  Debt collectors have been penalized for trying to collect on unsubstantiated debt, unlawfully threatening legal action against consumers, and other violations.

When it comes to the cause of debt protection, we have to root for a Democratic victory this November.