Experts, industry leaders, and not to mention millions of Americans are now waiting with bated breath; among a laundry list of concerns will Trump weaken, and potentially dismantle regulations created after the 2008 economic meltdown that protect consumers from the financial industry? And if it happens, what does it mean for you and me?
Let’s find out – starting from the beginning:
What is the Consumer Financial Protection Bureau (CFPB). Can you tell me about them and their role in financial regulation?
The CFPB is a watchdog agency that was created under the 2010 Dodd-Frank Wall Street reform law as part of the response to the 2008 financial crisis (Click here to learn more about Dodd-Frank). The creation of the CFPB was spearheaded by Senator Elizabeth Warren (D-Mass.). The Bureau is currently led by Democrat Richard Cordray whose 5-year term is set to end in 2018. For more about the CFPB, visit here.
I’ve heard the CFPB is structured differently from most government agencies. Is that true?
Yes – it’s a little different. The Director of the CFPB is appointed by the President and confirmed by the Senate. The Bureau was also established as an independent agency. This means they could implement federal consumer financial laws without oversight from any branches of the government. Funding for the Bureau comes from the Federal Reserve, rather than through Congress. These structures were put in place to allow the Bureau to maintain political independence, which in turn allowed the agency to truly protect consumers.
What does the CFPB actually do for me?
Over the past 6 years, the CFPB has had a large role in ensuring consumer protections despite backlash from industry. The following are some of the areas in which the CFPB has protected the American people:
- CFPB ordered TransUnion and Equifax, credit reporting companies, to pay $5.5 million in fines and $17.6 million to consumers for deceiving them about the cost and use of credit scores
- CFPB fined Wells Fargo Bank $100 million, the largest penalty it has ever imposed, for illegally opening up unauthorized accounts to reach sales targets and receive bonuses
And in general:
- More than 27 million consumers have received $11.7 billion in relief from CFPB enforcement actions that have taken place due to illegal practices of credit card companies, banks and debt collectors
- Consumers now have a quick and responsive way to register complaints. Complaints can be submitted here.
- The CFPB can prevent mortgage companies from making loans without verifying repayment ability
- The Bureau monitors credit reporting and the debt collection industry, industries that have previously been largely unregulated and predatory of consumers.
Haven’t some people already played a role in disempowering the Bureau?
They’ve certainly tried! In October 2016, a federal court ruled the Bureau’s structure to be unconstitutional. The concern was around the amount of power held by one person, the Bureau’s Director. The Bureau openly and respectfully disagreed with the court’s decision reiterating that the structure was created so that the Bureau could remain independent of political influence. However, the ruling means the Bureau will now be directly subject to the executive branch, and to the administration’s beliefs. This opens the door for conservatives, who are often in favor of minimal industry regulation, to disempower and potentially dismantle the Bureau.
What changes has the Trump Administration talked about making?
First, there is speculation that the Trump administration will use the recent federal court ruling to overthrow the agency’s current director prematurely. You can learn more about Cordray here. Trump will likely replace Cordray with a Republican of his choice who won’t pursue rigorous oversight of the industry.
Second, Republicans have proposed legislation to put CFPB under Congress. This means the initial purpose of the agency, to act independently, will be lost.
Third, on the campaign trail Trump mentioned that he would repeal Dodd-Frank completely. This includes the CFPB. Some of the advisors he’s chosen and the statements he’s made about financial regulation are at odds, so experts are unable to predict exactly what will happen.
So if there is no CFPB, who is looking out for me?
This is where Cinch comes in. Cinch was created to serve as a fiduciary to the end user, leveling the playing field by bringing the same transparency and information available to the big financial companies directly to you, in the simplest, most efficient way. This means evaluating the entire product universe to make sure we double check every possible option for you. And as a fiduciary, we cannot accept any revenue from product providers, as that would be in direct conflict with our purpose. So no advertising, no lead-generation, no spam.
In full alignment of the mission, Cinch Financial has worked closely with the CFPB to ensure that consumer advocacy is at our core and fully reflected in the algorithms and business processes we’re building.
And the best part? Cinch isn’t going anywhere.