Financial “CHOICE” Act is “Cruel Choice” for CFPB & Consumers & Students
Latest CFPB Complaints Report Shows 325% Increase in Student Loan Servicing Complaints
(Link to U.S. PIRG Letter To U.S. House of Representatives opposing the Financial Choice Act 2.0.)
Washington, DC – This week, House Financial Services Chairman Jeb Hensarling (TX) will hold a Wednesday hearing on his so-called Financial Choice Act 2.0. The bill leaves consumers and our economy even more vulnerable to Wall Street’s recklessness than before the ’08 crisis by taking aim at all of the 2010 Dodd-Frank Act’s protections caused by unfair bank practices abetted by regulatory failures.
In particular, the bill would gut the Consumer Financial Protection Bureau, even as its latest report shows a critical need for the bureau to protect students. Student loan complaints have surged 325 percent from last year at this time to this year, likely driven by publicity around its January enforcement action against servicing giant Navient. Forty-nine of 50 states saw complaint increases of 50 percent or more. Against a backdrop of $1 trillion in student loan debt in the country, the agency has prioritized enforcement action in student lending this year.
Christine Lindstrom, higher education advocate for the U.S. Public Interest Research Group, said, “After suffering through years of predatory lending tactics, student loan borrowers finally have the CFPB in their corner. Now Chairman Jeb Hensarling (TX) of the House Financial Services Committee is delivering a low blow by weakening the bureau’s power.”
“In just under 6 years, the nascent CFPB has restored order to financial markets torn asunder by a decade of weak regulation that emboldened corporate wrongdoers and led to the 2008 collapse,” said Ed Mierzwinski, Consumer Program Director at U.S. PIRG. “This reckless piece of legislation makes the wrong choice for consumers and the economy while Wall Street and predatory lenders cheer.”
The CHOICE Act eviscerates consumer protections by:
1. Reversing 150 years of federal policy, the bill eliminates independent funding for the CFPB by placing it under the politicized Congressional appropriations process, giving powerful special interests massive influence over regulation of our financial system and economy;
2. Neuters the director by allowing he or she to be fired at will and moving the agency fully under the executive branch;
3. Terminating the CFPB’s UDAAP (Unfair, Deceptive, or Abusive Acts and Practices Authority) authority, limiting its ability to protect consumers and end dangerous practices;
4. Eliminating the CFPB’s supervisory authority over all banks greater than $10 billion in assets and returning that authority to the bank regulators that infamously ignored warning signs of or even encouraged dangerous practices that led to the 2008 financial crisis;
5. Eradicating the CFPB’s public consumer complaint database that forces wrongdoers to respond to consumer complaints;
6. Making the CFPB’s key offices, of Older Americans, Financial Empowerment, Service Member Affairs and Students “optional,” so a future anti-consumer director could simply eliminate them. The Office of Students has led the bureau’s lawsuit against Navient, the massive student loan servicer, and has also protected student victims of numerous failed for-profit schools
The Choice Act also eliminates numerous important safety-and-soundness and investor protections also enacted in the Dodd-Frank Act after the 2008 collapse. The committee is expected to vote on the bill as early as May 2nd and bring it to the floor in May as well, the group said.
“The idea of the CFPB needs no defense, only more defenders,” concluded Mierzwinski. “It is shocking that a bill that is the wrong choice for students, service members, veterans, and indeed all consumers and our economy is being seriously considered just 9 years after the second-worst financial collapse in our nation’s history.”
U.S. PIRG serves as the non-profit, non-partisan federation of state Public Interest Research Groups. PIRGs stand up to powerful interests whenever they threaten our health and safety, our financial security, or our right to fully participate in our democratic society. On the web at uspirg.org.