Guess who the
dynamic duo, i.e. Vivek and Elon, might go after next? Of course, it could be our
citizen advocate, CFPB, known as The Consumer Financial Protection Bureau.
As reported
recently on
MSNBC by (and truncated below:
“The Silicon Valley Bros are not fans of the
Consumer Financial Protection Bureau. Elon Musk would like you to know that he
believes the bureau is an unnecessary bureaucratic hiccup and one that should
not exist. “Delete CFPB,” he posted on X last week, adding
it’s “duplicative,” a perfect target, he seemed to indicate, for his DOGE
commission to improve government efficiency. Musk’s comment was in response to,
yes, another post, this one detailing claims about the agency made by venture
capitalist Marc Andreessen on Joe Rogan’s popular podcast. Andreessen claimed
the CFPB is the personal fiefdom of Sen. Elizabeth Warren, D-Mass., and that it
pursues political and business vendettas against Republicans and small, scrappy
fintech startups on behalf of Democrats and the big banks.
None of this is true. The
amount of bad faith and seemingly deliberate duplicity on display here — by
Musk, Andreessen, and many who support them online — is staggering. The CFPB
aims to protect the American people from vested financial interests big and
small, ranging from too-big-to-fail banks to fly-by-night payday loan lenders
to Silicon Valley fintech startups. Almost all these interests hate it, not
because the agency is “duplicative,” but precisely because it is not “
On
Rogan’s program, Andreessen claimed the CFPB orders “debanking” — that is,
forced shutting down of bank accounts and other financial tools — for those it
believes have “the wrong politics.” But debanking is, for the most part, not a
CFPB issue — and where it is, the CFPB is doing the exact opposite of
what Andreessen claimed. In August, the CFPB filed a brief in a legal case arguing that debanking of
religious conservatives is a form of discrimination. At a panel earlier this
year, CFPB Director Rohit Chopra argued that this amounts to payment services’
“setting laws or conditions outside of the democratic process.” On Tuesday, the CFPB followed this up by making it
clear a proposed new rule would, if finalized, stop the sale by data brokers of
personal info to scammers, and could
also combat debanking that occurs because of identity theft or other fraud.
However, the CFPB has a lot to
do with regulating the fintech space, which is something that Andreessen, Musk,
and the rest of Silicon Valley are very interested in. Let’s start with what Andreessen did not
disclose to Rogan’s audience. In 2021, the CFPB shut down a fintech named
LendUp Loans after the agency flagged and fined it multiple times for offenses
including lying to customers and tricking them into taking on high-interest
loans. Earlier this year, the bureau announced it would distribute
nearly $40 million to “118,101 consumers who were deceived by LendUp Loans.” It
was a humiliating end for a firm whose backers, according to The Wall Street Journal, included
“some of the biggest names in venture capital, including ... Andreessen
Horowitz.” Yes, that Andreessen.
More
broadly, under Chopra, the CFPB has moved in on the Wild West environment of
digital payment and wallet apps, including not just Venmo and PayPal but also Google and Apple. It has subjected them to federal oversight and
issued regulations governing their behavior regarding fraud — not dissimilar to
how traditional banks are treated.
Silicon Valley,
unsurprisingly, is no more happy to subject itself to
rules than Wall Street is. In particular, Musk — who has made it no secret that
he would like X to branch into digital financial services — has a long track
record of attempting to bend the government to his will and flouting its
authority when he cannot.
The CFPB, born out of
the financial crisis, stands in the way of all that. Little wonder Musk and
company think it needs to go.”
How
did we get to this point regarding an agency much respected by the general
public?
After years of
battles, the Consumer Financial Protection Bureau (CFPB) opened its doors in
2011. Elizabeth Warren, then a professor at Harvard, previously led a committee
on financial oversight as requested by Congress. Her findings suggested better
transparency in all lending practices, a reduction of legalese in documents,
and a simple explanation of costs with no hidden fees. Created by Congress under
the Dodd-Frank Financial Law to restructure some lending practices that many
thought contributed to an unstable economy. Loans were made, then bought and
sold to conglomerates, no longer based in a local community and with little interest
in small or local markets. The stated goals were, as described by Warren:
1.
To
ensure consumers have enough timely information to make responsible financial
decisions
2.
To
protect consumers from unfair, deceptive, or discriminatory practices
3.
To
reduce unnecessary or burdensome regulations
4.
To increase
fair competition and enforce federal law consistency by equal law enforcement
and
5.
To
advance a market that is transparent and efficient and promotes access and
innovation
But, almost
before the new bureau could set up its files, Republicans, lenders, and others
in the financial industries set out to undermine the authority it was granted. Professor
Arthur E Wilmarth Jr. described the issue in 2012 in a George Washington University
Law publication titled:
The Financial
Services Industry’s Misguided Quest to Undermine the Consumer Financial Protection
Bureau
He concluded:
“The financial crisis has shown convincingly that a
systematic failure to protect consumers will eventually threaten the stability
of our financial system as well as our general economy. Congress should
therefore preserve CFPB’s existing authority and autonomy despite the
determined attacks of the financial services industry and its Republican
allies.”
You might have
forgotten just how fraught the situation was in 2008 before President Obama
took office. Banks were failing, buyers were defaulting on their loans, Lehman
Brothers could not find a backer and folded, world markets were skittish, and
the auto industry was on the verge of collapse. Treasury did not want to move
boldly, Congress did not want to bail out anyone, and there was a presidential
campaign underway. Widespread defaults caused losses even for those with
sensible mortgages because their neighborhoods were devalued by the empty homes
nearby.
So, once the
Bureau got started, it had to set priorities. One of the first issues they worked
out for consumers was in the mortgage industry, where predatory lenders convinced
homeowners to buy mortgages they could not afford, and should not have
qualified for. Coupled with high interest rates and saddled with homes that, because
of the housing market downturn during the Great Recession, were under water (no
longer worth what they cost), many buyers simply walked away from their homes.
Many companies,
when scrutinized, could not stay in business. The CFPB worked with the industry
to root out the rotten apples, consolidated services in larger companies and
began a massive consumer education program to increase financial literacy. It
also addressed many of the excesses and unfair practices in the banking
industry. Wells
Fargo was a good example of these practices in 2015. In a statement, the CFPB
discussed the issue.
“Today
we fined Wells Fargo Bank $100 million for widespread unlawful sales practices.
The Bank’s employees secretly opened accounts and shifted funds from consumers’
existing accounts into these new accounts without their knowledge or permission
to do so, often racking up fees or other charges.
"Wells Fargo
employees secretly opened unauthorized accounts to hit sales targets and
receive bonuses. Because of the severity of these violations, Wells Fargo is
paying the largest penalty the CFPB has ever imposed. Today’s action should
serve notice to the entire industry that financial incentive programs, if not
monitored carefully, carry serious risks that can have serious legal
consequences."
Bank
employees temporarily funded newly-opened accounts by transferring funds from
consumers’ existing accounts in order to obtain financial compensation for
meeting sales targets. These illegal sales practices date back at least five
years and include using consumer names and personal information to create
hundreds of thousands of unauthorized deposit and credit card accounts.
The
law prohibits these types of unfair and abusive practices.
Violations
covered in today’s CFPB order include:
- Opening deposit
accounts and transferring funds without authorization, sometimes resulting
in insufficient funds fees.
- Applying for
credit card accounts without consumers’ knowledge or consent, leading to
annual fees, as well as associated finance or interest charges and other
late fees for some consumers.
- Issuing and
activating debit cards, going so far as to create PINs, without consent.
- Creating phony
email addresses to enroll consumers in online-banking services.
Certainly, if
this happened in my bank account, I would agree that the punishment should be
severe. If the CFPB were not in place as a watchdog with enforcement actions,
other banks could also exercise unseen powers that harm the consumer. And, this
is just one industry. Other enforcement actions were taken against junk fees,
credit card fees, and overdraft practices, as well as the payday loan industry.
According to
the agency website, as of 2023, over 17 billion dollars has been returned to consumers
in the first ten years.
$17.5 billion–The
amount of money the CFPB has put back in Americans’ pockets in the form of
monetary compensation, principal reductions, canceled debts, and other consumer
relief resulting from CFPB enforcement and supervision work
$4 billion–the
amount of money CFPB has imposed in civil money penalties on companies and
individuals that violate the law. This money is deposited into the victims relief fund which
provides compensation to people who have been harmed by violations of federal
consumer financial protection law
200 million–The
estimated number of consumer accounts eligible to receive financial relief from
the CFPB’s enforcement and supervision work
$175 million–The
amount of monetary relief resulting from 39 public enforcement actions that
involved harm to service members and veterans
50.1 million –The
number of users who have accessed answers to hundreds of common financial
questions via the CFPB’s Ask
CFPB database
4 million–The
number of consumer complaints the CFPB has sent to companies for response on
behalf of consumers. Our public Consumer Complaint Database has published over
3.8 million of those
3,000–The
average number of complaints the CFPB handles each day
180–The number of languages that consumers can
use to file a complaint
This,
certainly, is an agency that should stay in business. Call your representatives
now.
As of
tonight, there is a lot of turmoil in the world outside our borders. Remarks
by the president-elect do not seem to be a stabilizing factor. And Tulsi
Gabbard’s friendship with Syria’s Assad is again called into question. Assad
fled to Russia as cities fell in his country to an armed insurgency.
Til next
week-Peace!
