While I'm grateful that Elizabeth Warren is challenging Scott Brown in Massachusetts, I think we can all agree that she was the natural choice to be the Consumer Financial Protection Bureau (CFPB) director, had Congressional Republicans and their bankaneer keepers not opposed her so vehemently. After she stepped down, the White House nominated Richard Cordray, a nomination which has been approved by the Senate Banking Committee on a straight party line vote.
That nomination is now headed for a vote in the Senate this week. Concurrent with that vote, the White House has released a white paper (PDF) on why it is so critical that Mr. Cordray be confirmed as CFPB director as soon as possible. Here are a few of the reasons:
- Payday Lenders: Before Dodd-Frank, payday lenders were not subject to federal supervision, enabling them to engage in predatory practices with little oversight or regulation. I had a look at payday lenders in California, a state which presumably has some limits on how far they can go. On one lender's website, they reported their APR as 460.16 percent! Predatory seems like an understatement, particularly when those most likely to take a payday loan are those who are already struggling to feed their families and pay bills.
- Credit Reporting Agencies: Right now, credit scores are governed by the Fair Credit Reporting Act (FCRA). Oversight of credit score agencies is not pro-active; that is, you can file a complaint under the FCRA if you believe your credit is unfairly tarnished, but there is no agency actively looking at how scores are developed, whether they are discriminatory, whether there are unacceptable levels of error or other factors which negatively harm consumers. Under the Dodd-Frank Act, oversight of credit reporting agencies would be part of CFPB duties.
- Debt Collectors: As anyone who has faced debt collections knows, debt collectors are relentless, despite laws to rein them in. The debt collection industry is lucrative with $1.2 trillion in consumer debt currently delinquent (and $834 billion past 90 days), yielding collectors about $40 billion from consumers out to collect the debt. This 2008 Kiplinger article describes what the inside of a debt collection operation is like. It isn't pretty. Death isn't even an escape hatch.
- Prepaid Debit Cards: You can't walk into a market or anywhere else this time of year without seeing a display loaded with prepaid gift cards alongside American Express, MasterCard and Visa cards. But prepaid cards are a very expensive way to give a gift. Loading the card and activating it will trigger a fee, as will reloading it. According to this article, branded debit cards are expected to be worth $440 billion by 2017. That's a substantial chunk of consumers' money that is unregulated at this time.
- Independent Non-Bank Financial Institutions: As the report notes, those most vulnerable to predatory practices by non-bank financial institutions are young military service members, the elderly, students and Latinos. Anyone who has college-age children has seen the storm of mail that hits the house as soon as the first SAT is taken, offering them the moon on a platter for the low, low price of 21% interest or thereabouts. Private student loans, credit cards, financial investment scams and overseas transfers are currently monitored by no one particular agency. While individuals might be able to challenge certain schemes, there isn't any kind of proactive oversight of schemes and scams that harm ordinary Americans.
Without the CFPB, banks will still have federal oversight and some level of accountability, but these other costly, often predatory, schemes will not. Republicans in Congress have done their level best to stymie every move toward launching this agency. It's really time to put the pressure on and force them to confirm Mr. Cordray and allow Dodd-Frank's provisions to begin to rein in the profit-taking on the 99 percent at the hands of the 1 percent. It isn't just banks. It's these actors, too.