Less than ten years after our economy went into a free fall, Rep. Jeb Hensarling, R-Texas, chair of the House Financial Services Committee, has introduced legislation, innocuously named the Financial Choice Act that could throw our economy back into recession.
Members of Congress face an important decision with this bill, which has been appropriately nicknamed the “Wrong Choice Act.”
During the foreclosure crisis, Californians lost their homes, their retirement savings, their jobs, their small businesses, and their dignity. Parents explained to their children that they would be leaving the homes they had grown up in and would also have to switch schools. Homes that had been in families for generations were foreclosed on by banks. In many cases, homeowners of color were targeted for costlier loans, and also experienced worse outcomes when they sought relief via loan modifications. Not surprisingly, our country’s wealth gap increased because of the mortgage meltdown. The ACLU estimates that by 2031, the average African-American family will have a net worth of almost $100,000 less than if the foreclosure crisis hadn’t happened.
One of the most egregious aspects of the foreclosure crisis was that many families who qualified for modifications still lost their homes. It wasn’t because they didn’t ask for help. It happened because banks and mortgage servicers refused to adequately staff their operations, to train their front-line employees, or to take greater responsibility for solving this huge problem they had helped create. At a recent hearing about the Choice Act, Rep. Charlie Crist, D-Fla., asked his colleagues “Have you already forgotten the desperate calls from your constituents?”
In response to the mortgage meltdown and the Great Recession, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act, which implemented common-sense safeguards, including the creation of the Consumer Financial Protection Bureau.
For the first time in history, a government agency was given the sole mission of leveling the uneven playing field between Americans and large and powerful financial service companies.
Since opening its doors, the CFPB’s work has translated into tangible improvements for Americans and their finances. Using the CFPB’s public complaint database, consumers can quickly and easily submit a complaint about a financial services company, and more than 100,000 Californians already have. Not only does this often result in the individual consumer’s problem getting addressed, but it also gives the CFPB real-time analytics to act on concerning trends.
The CFPB has forced mortgage servicers to improve their operations; it’s stopped lenders from engaging in abusive and predatory practices, and by working with the Los Angeles city attorney, it helped ensure the Wells Fargo settlement provided nationwide relief.
While working families benefit from the CFPB, some in the financial services industry would prefer the CFPB didn’t exist at all. During the past election cycle, Wall Street Banks and financial interests spent more than $2.5 million a day on lobbying and campaign contributions, according to Americans for Financial Reform.
If the Choice Act were to be enacted, the CFPB director would be made into a political appointee, meaning President Donald Trump could fire him or her at will. The CFPB’s ability to stop harmful practices would be greatly diminished; payday, car title, and installment lenders would no longer be regulated by the CFPB; and the CFPB’s complaint database would be eliminated.
Rep. Stephen Lynch, D-Mass., commented at a hearing that it was the worst bill he’s seen since entering Congress in 2001, explaining, “I’ve never seen so many bad ideas jammed into one bill.”
We urge our elected officials to think long and hard before voting for any legislation that would lead us down the road to another Great Recession.