CU outlines agenda for new financial watchdog
October 14, 2010
Consumer Financial Protection Bureau
WASHINGTON, D.C. — Consumers Union, the nonprofit publisher of Consumer Reports, outlined an agenda today for the newly authorized Consumer Financial Protection Bureau (CFPB). The CFPB was established as part of the financial reform package signed by President Obama over the summer and will serve as a financial watchdog for consumers.
Starting in July 2011, the Consumer Financial Protection Bureau will be charged with identifying and stopping unfair, deceptive, and abusive practices in the sale and delivery of financial services to consumers. The CFPB will have the responsibility to keep the rules governing financial service products up-to-date and to respond to consumer complaints.
“Beginning next year, consumers will finally have a watchdog in Washington looking out for their financial interests,” said Gail Hillebrand, Director of Consumers Union’s Defend Your Dollars campaign (www.DefendYourDollars.org) “The Consumer Financial Protection Bureau should move aggressively to take action against unscrupulous lenders and unfair financial practices that drain family wallets and make it harder to make ends meet.”
Consumers Union identified a number of priority issues that need the CFPB’s attention, including:
Ending Credit Card Rip-Offs: The CFPB needs to finish the job of protecting consumers from abuses by big banks and their credit card programs. The CFPB should reduce the amount banks can charge for penalty fees, limit the size of penalty interest rates, and require banks to enable consumers to more easily earn their way back to a better interest rate.
Protecting Individual Checking Accounts: Consumers need better and safer checking accounts. The CFPB should stop banks from clearing checks and payments in an order that maximizes bounced checks and overdrafts, and end all overdraft loan programs unless the customer requests to participate, and work with the Federal Reserve Board to require banks to speed up customer deposits.
Requiring Equal Protections For All Forms of Payment: Consumers are offered many ways to pay, but not every method of payment has the same legal protections if the payment device is lost, stolen or misused. The CFPB should make sure that consumers enjoy the same protections from unauthorized charges and mistakes for all kinds of plastic cards and every form of mobile payment.
Fixing the Credit Reporting System: Credit report mistakes are all too common and can have serious consequences for consumers trying to get a loan, rental housing or even jobs. The CFPB should audit the big credit reporting agencies to ensure their compliance with existing requirement to maintain accurate consumer credit files and require them to investigate and fix errors reported by consumers.
Stopping Debt Collection Abuses: The CFPB was given the power to develop new rules to curb debt collection abuses, one of the top consumer complaints nationwide. The CFPB should require creditors collecting debts to meet the same standards that apply to third party debt collectors, impose an expiration date on very old debt, and stop debt buyers from trying to collect debt without evidence that the consumer owes money.
Policing the Mortgage Market: The CFPB should police the mortgage market to stop scams against consumers and prevent the return of the toxic loans and dangerous lender practices that helped trigger the recession.
Addressing Dangerous Short Term Small Loans: Auto title lenders and payday lenders make loans at annual percentage rates of 300-400 percent or more. The CFPB should institute a number of reforms to protect consumers from these high cost loans, including stopping the evasion of existing interest rate caps through junk fees and requiring that lenders allow borrowers to pay loans back in installments.
Cleaning Up Car Loans: The CFPB should work with the Federal Trade Commission to stop lender payoffs to auto dealers who steer consumers into more expensive loans and prohibit dealers from pressuring car buyers into signing up for higher priced financing than what was initially promised.
Ending Mandatory Arbitration in Financial Services Contracts: Arbitration is unfair for consumers because decisions can be kept secret, arbitrators don’t have to follow the law, and the banks unfairly select and hire arbitrators. The CFPB should ban mandatory arbitration clauses in consumer financial services contracts. If consumers want to arbitrate, they can agree to it voluntarily after a dispute arises.
“Consumers face a myriad of unsafe financial products and services in the marketplace that can trap them in high interest debt,” said Pam Banks, Senior Policy Counsel for Consumers Union. “Once the CFPB is up and running, it should tackle these abusive and deceptive practices and be on the look-out for the next generation of financial scams.”
Michael McCauley – 415-431-6747 or David Butler – 202-462-6262