By Ed Mierzwinksi, U.S. PIRG
UPDATE: Link to our letter to all Representatives opposing the Wrong Choice Act.
Original Post: Yesterday we released the U.S. PIRG Education Fund/Frontier Group report “Protecting Those Who Serve,” showing how the CFPB works to protect service members, veterans and their families from financial predators that “line up outside our military bases like bears on a trout stream.” Chart is a Google map of predatory lenders outside approaches to Fort Hood, Texas. Today the House begins floor debate on the so-called Financial Choice Act (our detailed opposition letter). This Wrong Choice Act, incredibly, turns the CFPB into an unrecognizable husk incapable of protecting anyone, including service members.
The report is the 10th report in a series of ours based on analysis of complaints in the CFPB’s Public Consumer Complaint Database. We looked at 44,000 complaints with “military” tags. The report goes onto explain how financial problems from either predatory lending, unfair practices or credit bureau mistakes affect military family lives and affect the nation’s unit preparedness. Unit preparedness? According to the Pentagon, bad credit is the leading cause of service members losing security clearances, severely affecting our ability to field and deploy an adequate force to defend the country.
We were privileged to join several military support organizations that support the CFPB to help release the report at the Veterans of Foreign Wars (VFW) national headquarters.
The design of the Financial Choice Act is diabolical. The bill eliminates the CFPB’s independent agency status and its independent funding; placing it in the executive branch and under the highly-politicized appropriations funding process. It also eliminates most of its funding anyway and sets it up for further appropriations cuts or limits on what it can do with whatever money is left.
It then takes away nearly all of CFPB’s enforcement, marketplace surveillance and rulemaking tools.
- It eliminates all its authority over unfair, deceptive or abusive practices. (The FTC, all other federal financial agencies and all state attorneys general use similar authority as an important tool. It is hard to figure what, if anything, the CFPB will be able to do to protect consumers without it). As the authoritative Consumer Federation of America points out in a new fact sheet, this would have made it impossible to do most, if not all, of the 12 CFPB enforcement actions specifically targeted at abuses of servicemembers and veterans.
- It eliminates the Public Consumer Complaint Database, which holds financial firms accountable to their customers and assists researchers monitoring the financial marketplace. The consumer complaints in the public database (including un-redacted information available only to CFPB), assist it in providing early warnings of potential problems. We analyzed over 44,000 of those complaints (“military” tag) in this report alone. There are 800,000 complaints in the database, so far.
- It takes away CFPB’s authority to do any consumer education.
- It explicitly forbids the CFPB to take any action related to payday and other high-cost small dollar lenders and restricts state authority over them. As we show in the report, predatory high cost lenders line outside bases like “bears on a trout stream.”
Without virtually any funding, or any enforcement and marketplace surveillance tools, the CFPB will be hard-pressed to identify illegal acts under or enforce any of the laws, including the Military Lending Act and the Servicemembers Civil Relief Act, providing special protections for servicemembers and veterans. Of course, this rollback also applies to other laws that protect servicemembers and everyone else, including the Truth in Lending Act, the Fair Credit Reporting Act, the Fair Debt Collection and Practices Act and other laws.
Of course, the above attacks on the CFPB hinder its ability to protect any consumers, including servicemembers. Finally, though, as a kicker, the Financial Choice Act also makes the CFPB’s statutory Office of Servicemember Affairs into an “optional” office, meaning a future director could eliminate it. To learn more about what the OSA does, see page 15 of the report “Protecting Those Who Serve.” (The bill also makes CFPB offices for students and older Americans optional).
The Wrong Choice Act Sets On A Road to Further Economic Collapses
Our detailed letter opposing HR 10, the so-called Financial Choice Act, also details its many weakenings to other aspects of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Act gave prudential regulators including the Federal Reserve and FDIC additional powers to watchdog banks and other financial players to prevent the dangerous practices that caused the financial collapse of 2008 and led to the great recession. It established a new Financial Stability Oversight Council to ride herd over very large, complex institutions whose actions or failures could impact our financial system. It gave the tiny Commodities Futures Trading Commission and Securities and Exchange Commission more authority to watch over reckless trading in derivatives and other investment instruments.
That second-worst financial collapse, which only caused millions to lose homes, millions more to lose jobs and millions more to lose trillions in retirement savings happened less than ten years ago. Have proponents of the Financial Choice Act forgotten it, or do they choose to ignore it at our peril? Either way, HR 10 is the wrong choice, a cruel choice and a dangerous choice. Its proponents reject consumer protection, they reject protecting those who serve from financial predators, and they reject their responsibilities as stewards of the nation’s government and its financial system.