With every paycheck, employed Americans are reminded of the multiple tax deductions taken out of their wages which pay for government services. If you’re like most people working for a living, the greatest deduction is for federal taxes.
It’s a tax that people pay instead of confronting the wrath of the Internal Revenue Service. It’s also an investment that’s made with the expectation that our democracy will also meet its promises to be “of, by and for the people.”
However, when it comes to the current leadership in the Consumer Financial Protection Bureau (CFPB), that adage no longer applies. Rather, Acting CFPB Director Mick Mulvaney has changed the agency from one that supplied protections and restitution for scammed individuals to a full-fledged protection of financial service companies.
The unfortunate consequence for taxpayers is that we’re just not getting any value from this key institution these days. The Dodd-Frank Consumer Protection and Wall Street Reform Act is clear as to the responsibilities given to the CFPB.
Under previous management, tens of thousands of dollars were returned to consumers for a host of illegal and deceptive acts by predatory financial institutions. This was accomplished with assistance from a committed staff.
The only difference now is that Mulvaney has no interest in fulfilling the law as it had been enacted. And for the general public, we’re simply not getting exactly what the legislation promised.
In May and under Mulvaney’s direction, the CFPB declared it would end rulemaking plans to address bank overdraft fees. Overdraft fees are billed when the cost of a given transaction is more than the amount of available funds in an account.
Often marketed as a “customer service,” these charges average $35 per transaction but cost consumers an estimated $14 billion each year. Fees are incurred with ATM withdrawals, electronic bill payments and paper checks. The financial institution repays itself with another deposit into the account, ahead of other purchases.
Most banks manipulate transaction posting orders, driving up the amount of charges incurred. The customers hardest hit by these fees are those who really can’t afford them: consumers who those who live paycheck to paycheck and/or keep low balances in their accounts.
“Mulvaney’s decision to stop the CFPB from moving forward on fixing abusive overdraft fee practices will severely impact poor households and families of color,” said Rebecca Borne, senior policy counsel at the Center for Responsible Lending.
In June, Mulvaney disbanded the bureau’s 25-member Consumer Advisory Board. Mandated by Dodd-Frank, this volunteer team meets twice a year. On Mulvaney’s watch, however, no in-person meetings were convened.
“We now have a CFPB which has political advisors who essentially aren’t interested in protecting American consumers,” said Ruhi Maker, a former CAB member who is a senior staff lawyer at the New York nonprofit law firm Empire Justice Center. “They are interested in serving those individuals who prey on American consumers and make profits on the backs of American consumers who have the least ability to afford it.”
Additionally, in June, Mulvaney publicly sided with the payday lending industry’s attempts by joining the leading payday lenders’ association in submitting a joint motion to delay the compliance date to the CFPB’s rule on payday loans for 445 days.
The normal payday loan may only be $365 but has an average interest rate of 361% and $458 in fees — payable in full, usually within a couple of weeks. The creditor requirement of full payment triggers a long-term snare for borrowers: 75% of payday fees are relinquished from borrowers stuck in more than 10 loans per year. Likewise, 85% of car-title loan renewals happen within 30 days of a previous one which could not be fully reimbursed. Also, one out of every five borrowers end up losing their automobile to repossession.
Now, 15 states and the District of Columbia have enacted interest rate caps on payday loans. A CRL study found that consumers in these nations save $2.2 billion annually which otherwise would have been compensated for predatory fees.
In spite of these findings, the multi-billion-dollar payday lending industry remains adamantly opposed to some rule that provides only two basic terms: an ability-to-repay standard and payment protections. The former requires creditors to make a reasonable determination before loan approval that customers can afford to repay the loan. The latter provision prevents lenders from accepting repayment from checking account after two successive efforts failed.
Currently, to make matters much worse for consumers, President Donald Trump’s U.S. Supreme Court nominee, Judge Brett Kavanaugh, if confirmed by the Senate, would be a possible ally to Mulvaney. As a part of this D.C. Circuit Court of Appeals, Kavanaugh has a record of opposition to the structure of the CFPB, which he has termed to be unconstitutional.
In the October 2016 ruling in PHH v. CFPB, he wrote, “The focus of massive, unchecked power in a single director marks a dramatic departure from settled historical practice and makes the CFPB unique among independent agencies.”
“Truly, aside from the president, the manager of this CFPB is the single most powerful official in the whole United States government, at least when measured concerning unilateral power,” Kavanaugh wrote. “That isn’t an overstatement.”
Rather than protecting consumers from predatory lenders that bilk hard-earned money from unsuspecting customers, Mulvaney is directing CFPB to extend his continuous string of actions that benefit financial solutions.
Unfortunately for consumers, CFPB’s acting manager is either forgetting or ignoring taxpayers who only need to be treated fairly.