The Consumer Financial Protection Bureau made clear when it opened for business in 2011 that it would be “a cop on the beat” to protect people from unethical, abusive and illegal behavior on the part of financial institutions.
That cop spent much of the last four years waving at passing bankers and lenders from the doughnut shop.
Things are about to change.
It’s a virtual certainty that President-elect Joe Biden will replace President Trump’s appointee as CFPB director, Kathleen Kraninger, with someone more focused on defending consumers than business interests.
“The CFPB’s once-stellar enforcement record and overall effort to stop illegal activity and hold financial entities accountable became instantly mediocre under the Trump administration,” Christine Hines, legislative director of the National Assn. of Consumer Advocates, told me.
To Kraninger’s credit, enforcement actions ramped up significantly after she took over from Mick Mulvaney in December 2018. The CFPB announced 48 enforcement actions last year, more than double the number of a year before.
These stats are misleading, however. Another key metric of the bureau’s effectiveness is how much money it pries out of companies that cross the line in their dealings with consumers.
In the bureau’s most active year under former President Obama, with 56 enforcement actions in 2015, it returned to consumers nearly $6 billion from settlements with businesses it oversaw.
In Kraninger’s most active year, total settlement cash returned to consumers fell precipitously to a fraction of the earlier amount — $783 million.
Then there’s the matter of fines being levied, as opposed to settlements. Settlements address matters of restitution, and fines can send a message to companies that bad behavior won’t stand.
In the 2020 fiscal year, which ran through September, the CFPB collected 34 fines worth a total $34 million.
The largest by far — $25 million — was levied against New Jersey-based TD Bank for alleged “deceptive and abusive acts” involving overdraft fees.
All other fines were much smaller. Thirteen were for $10 or less. Ten were for just $1.
One of the companies that had to pay only 100 pennies was a Tennessee payday lender called Main Street Personal Finance that allegedly duped consumers with “deceptive finance charge disclosures.”
The CFPB cited Main Street’s “inability to pay” as a reason for the bargain-basement penalty. Some might argue that this was small consolation to the payday lender’s customers, whose own financial difficulties simply resulted in increased debt.
Meanwhile, a Texas firm called Think Finance was slapped with a fine of $7, although that was actually a fine of $1 for Think Finance and $1 for each of its six subsidiaries.
They’re alleged to have engaged in “unfair, deceptive and abusive acts and practices” related to “the illegal collection of loans that were void in whole or in part” under the laws of 17 states.
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