By Renato Rocha, Policy Analyst, Wealth-Building Project, NCLR
The reckless behavior of financial institutions including banks, credit card companies, and mortgage lenders caused the 2008 financial crisis that cost Americans millions of jobs, billions in taxpayer-funded bailouts, and trillions of lost retirement savings. A lack of consumer protections and oversight of the financial marketplace allowed unscrupulous lenders to target communities of color with unfair and abusive financial products. The Latino community was disproportionately impacted by the economic crisis and is still struggling to recover.
The devastating and widespread effects of the crisis led to the creation of the Consumer Financial Protection Bureau (CFPB), which we view to be the crown jewel of Wall Street reform. In less than six years, the CFPB has already curbed several deceptive practices in the financial marketplace: bringing transparency to the remittance industry, prohibiting credit companies from adding on products that consumers never agreed to, and requiring mortgage lenders to ensure that applicants can afford the home loans they’re seeking. The CFPB is also working on putting protections in place that would rein in predatory payday loans and debt collection practices. Each one of these actions have helped put all Americans on a path to greater financial security.
Jeb Hensarling, the chairman of the House Financial Services Committee, hopes to destroy the CFPB, even though it’s one of the safeguards put in place to protect us from another financial crisis. Its sole mission is to curb unfair, deceptive, and abusive practices in the financial marketplace. Today, the Financial Services Committee held a hearing on the “Financial Choice Act of 2017,” Chairman Hensarling’s vehicle to dismantle the CFPB’s work.
Not only would the “Financial Choice Act of 2017” deregulate financial institutions and expose our economy as a whole to a heightened risk of instability, but the CFPB would be rendered powerless to accomplish its mission.
Specifically, the Financial Choice Act of 2017 would restrict or eliminate the CFPB’s effectiveness in some of the following ways:
- Exempt a wide range of mortgages from new “qualified mortgage” rules designed to prevent the consumer abuses seen in the subprime mortgages that contributed so greatly to the 2008 financial crisis, and exempt mortgages held on bank portfolios from consumer protections.
- Eliminate the CFPB’s ability to prevent and address financial wrongdoing by ending its supervision authority.
- Remove the CFPB’s authority to stop unfair, deceptive, and abusive acts and practices in consumer finance.
- Rescind the CFPB’s rulemaking, enforcement, or other authority with respect to payday loans, vehicle title loans, or other similar loans.
- Rescind CFPB guidance that prevents discrimination in auto lending.
- Make the director of the CFPB (and deputy director) removable at will by the president.
The reforms put in place after the financial crisis are essential for ensuring a stable economy and recovery for all Americans and to avoid future economic devastation. Since opening its doors, the CFPB and Director Richard Cordray have worked tirelessly to protect ordinary Americans’ hard-earned money from greedy Wall Street titans.
Chairman Hensarling’s attempt to dismantle the CFPB is the wrong choice for American families who need more opportunities to build and maintain wealth. NCLR and its partners are monitoring the “Financial Choice Act of 2017” and will continue to protect and defend the gains the CFPB have made.