Senator Elizabeth Warren Calls on Consumer Advocates to Show Support for CFPB
A number of Washington politicians want to get rid of the Consumer Financial Protection Bureau (CFPB) because "it's effective," Senator Elizabeth Warren (D-Mass) said Wednesday on a conference call with consumer advocates.
Warren was referencing calls by Washington Republicans to roll back – or do away with - the federal agency that is tasked with regulating big banks and Wall Street firms after the 2008 financial crash. She asked that consumer advocates continue to spread the message that the agency is vital to keeping financial institutions honest and accountable.
The Bureau, she said, is responsible for returning $5 billion to cheated consumers and has likely caused financial institutions to change their policies and think twice before engaging in questionable business practices.
Established in 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act, Warren initially proposed creating the CFPB in 2007 and was tapped by President Barack Obama to take the lead on the agency's establishment.
Since opening its doors in 2011, the agency has been under scrutiny from Republican lawmakers. After taking both the House and the Senate in fall 2014, the agency "has a target on its back," said Warren.
On the call, organized by Americans for Financial Reform (AFR), Warren outlined several well-reported ways that lawmakers are trying to change the operation of the Bureau.
Republicans have long called for an establishment of a board, rather than a single director, currently Richard Cordray, to keep any renegade regulators in check. Warren countered that having a single person in charge allows for faster administrative response times. The Federal Communications Commission, she said, has a five-member board and has been unable to effectively regulate the telecommunications industry.
The CFPB is currently funded by the Federal Reserve making it immune to budget cuts imposed by Congress. Lawmakers have called for the agency to be pulled into the appropriations process for more oversight of its finances. If this happens, said Warren, the funding of the agency would be determined by politicians who could be influenced by the same industries it is trying to regulate. "If Citibank doesn't like what the agency is doing, they can lean on their friends to cut the funding," she said.
According to data reported in the New York Times, the idea of Wall Street influence isn't farfetched. Texas Representative Jeb Hensarling, received donations on 13 separate occasions from the political action committees run by Bank of America, Citigroup, Goldman Sachs and JPMorgan Chase. Hensarling is the chair of the House Financial Services Committee.
As of mid-November, AFR reports, banks and financial institutions spent $1.2 billion in lobbying and campaign contributions.
The agency, for now, is still up and running and Warren said she'd like to see how it will tackle the problem of payday lending companies. Payday loans, often used by low-income borrowers or those with poor credit history, have been a target of consumer advocates who say they keep people in debt and in poverty.
The agency will also be looking at arbitration clauses that prevent people who have been cheated by a company from joining class action suits.
Warren asked that advocates use basic and simple language when explaining the issues at hand, adding that financial institutions have long used complicated language to intimate consumers. "Those who make money from cheating people want it all to seem complicated," she said.
More information about the campaign can be found on the AFR website.