While the House of Representatives is due to vote on the Financial CHOICE Act, the Republican-crafted plan to replace the Dodd-Frank Wall Street Reform and Consumer Protection Act, at some point this week, a coalition of 20 state attorneys general is urging the House leadership to consider the implications of such a vote and its impact on the Consumer Financial Protection Bureau.
The Financial CHOICE Act, as currently structured, calls for a change that would allow the president to fire the director of the CFPB at will, rather than for cause as it stands now.
Under the bill, the CFPB’s supervisory authority would be eliminated entirely.
Per the summary of the CHOICE Act 2.0, the CFPB would become an enforcement agency only, without supervisory functions. It would have power to enforce “enumerated consumer protection laws only,” without any UDAAP (Unfair, Deceptive or Abusive Acts and Practices) authority.
Additionally, the CFPB’s controversial consumer complaint database would no longer be published.
But, in a letter sent to the House of Representatives’ senior leadership on both sides of the aisle, the group of state AGs say that they oppose the Financial CHOICE ACT, recognize the importance of the CFPB, and support its work.
“The proposed act will eliminate many of the critical consumer protections implemented as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act in the wake of, and in response to, the financial crisis,” the state AGs write.
“As the chief consumer protection officers in each of our respective states, we write to call your particular attention to those portions of the act that would effectively eviscerate the role of the Consumer Financial Protection Bureau, the only independent federal agency exclusively focused on consumer financial protection,” the AGs continue.
“While the act purports to protect consumers from over-regulation by federal agencies, its far-reaching consequences would make consumers more vulnerable to fraud and abuse in the marketplace,” the AGs add. “The undersigned states support the work of the CFPB and oppose any effort to curtail its authority.
The letter is signed by the AGs of New York, California, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Mississippi, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington, all of whom are Democrats.
Specifically, the AGs letter calls out the elimination of the CFPB’s UDAAP authority, the elimination of the CFPB’s supervisory authority, the elimination of the CFPB’s consumer complaint database, and several other restrictions that would “effectively cripple the CFPB from doing the job it has been doing so effectively since its inception.”
The AGs note the environment that existed before the financial crisis and its impact on consumers and the work the CFPB has done to protect consumers since its inception.
“Our states’ work to protect consumers from unscrupulous marketplace actors and practices is greatly enhanced when the federal government serves as an effective partner,” the AGs write.
“In the years leading up to the global financial crisis, residents of our states suffered the consequences of a federal government that failed to fulfill its basic obligations to U.S. consumers to prevent fraud and misconduct by mortgage providers, servicers, and other financial firms,” the AGs continue. “Families nationwide suffered dire financial consequences as a result of lax federal oversight and inaction.”
The AGs add that the CFPB “has emerged as the independent federal consumer watchdog the nation has long needed, and as a key partner in critically important consumer protection work undertaken” by the state AGs.
“The exceptional record of the CFPB speaks for itself,” they add.
The AGs specifically mention the CFPB’s recent actions against Ocwen Financial and Wells Fargo among the positive actions taken by the bureau.
Back in April, the CFPB sued Ocwen for “failing borrowers at every stage of the mortgage servicing process.” According to the CFPB, its lawsuit alleges that Ocwen cost borrowers money, and in some cases, their homes, with its years of “widespread errors, shortcuts, and runarounds.”
And in September, the CFPB, the Office of the Comptroller of the Currency, and the city and county of Los Angeles fined Wells Fargo $185 million for more than 5,000 of the bank’s former employees opening more than 2 million fake accounts to get sales bonuses.
In the view of the AGs, passing the Financial CHOICE Act and its subsequent “crippling” of the CFPB would be dangerous for consumers.
“For these and other reasons, the undersigned States urge you to support robust and engaged consumer protection in the financial services industry by voting against the Act,” the AGs conclude. “A rollback of these significant post-financial crisis rules and regulations would substantially harm consumers and the public in general.”
Click here to read the AGs' letter in full.