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ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
NEWS: February 16 NEWS is brought to you by AFSPA Endorsed SUPPLIERS |
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Ted Cruz introduces bill to abolish CFPB
Texas conservative Sen. Ted Cruz on Tuesday introduced legislation to "abolish" the Consumer Financial Protection Bureau, highlighting the threat to the agency from the Right.
Cruz called the CFPB, created by President Barack Obama's 2010 financial reform law as the brainchild of Elizabeth Warren before her election to the Senate, an "out-of-control bureaucracy."
His legislation, he said, would give Congress "the opportunity to free consumers and small businesses from the CFPB's regulatory blockades and financial activism, which stunt economic growth."
Cruz's legislation, introduced with Republican Rep. John Ratcliffe of Texas in the House, goes further than legislation being formulated by the House Financial Services Committee. Neither Cruz nor Ratcliffe is on the banking committee in their respective chamber.
In a recent Wall Street Journal op-ed, House Financial Services Committee Chairman Jeb Hensarling, R-Texas, said it would not be possible to overcome a Democratic filibuster to abolish the bureau. Instead, he called for the agency to be "functionally terminated" through a roundabout legislative process using a budget tool that provides for passing legislation with a simple majority in the Senate.
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Don't Reform The CFPB - Shut It Down
Financial Crisis: The problem child of the Dodd-Frank reforms, the misnamed Consumer Financial Protection Bureau, may soon get the ax. Congressional Republicans have a plan to substantially reform it. Our advice: Just get rid of it.
"GOP preparing plan to gut Consumer Finance (sic) Protection Bureau, roll back Wall Street regulations," says a headline at the Washington Post's Wonkblog, citing a Republican memo that will supposedly serve as a roadmap for new legislation.
"The agency's rulemaking authority and enforcement powers would be limited, according to the memo, which also calls for an 'elimination of consumer education functions,' " the blog item said.
To which we answer: That doesn't go far enough. The CFPB should be closed down entirely.
Why? One of the great follies of the 2010 Dodd-Frank reforms is that it let Democrats pretend that "Wall Street greed" was to blame for the financial crisis. In a brilliant bit of jujitsu, Democrats used that false narrative to create a mass of new regulations - and a new super-regulator, the CFPB, giving it sweeping, near-dictatorial and likely unconstitutional regulatory control over nearly all lending in the U.S., from major mortgage lenders to payday lending shops.
It was created under false pretenses. The fact is, government, not Wall Street, was to blame for the crisis. Research by Edward Pinto, former executive vice president and chief credit officer for Fannie Mae, found that by 2008 more than half of all mortgages in the U.S. were subprime or otherwise risky, and 76% of those were on government agencies' books. And it is an indisputable fact that, from the Clinton administration on, government regulations required banks to lend to uncreditworthy borrowers, or face stiff penalties.
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Say goodbye to the controversial CFPB consumer complaint database?
The Consumer Financial Protection Bureau's consumer complaint database might not make it too much further past the one-millionth-complaint threshold due to a Republican-led effort to repeal the much-criticized database.
Last week, a memo reportedly from House Financial Services Committee Chairman Rep. Jeb Hensarling, R-Texas, revealed plans for an even more aggressive version of the Financial CHOICE Act, CHOICE Act 2.0, with the Consumer Financial Protection Bureau facing some of the most drastic changes.
Aside from the major changes to the leadership of the CFPB, outlined here, one of the most notable changes to the CFPB would the repeal of the consumer complaint database, established under Dodd-Frank as an integral part of the CFPB's work.
The database has undergone a lot of scrutiny ever since the bureau announced it wanted to make the consumer complaints that it receives public despite many of the companies featured in the database, as well as other industry observers, taking issue with the fact that the complaints were, in many cases, unverified and unproven.
The National Association of Federally-Insured Credit Unions, which voiced concerns with the database before, Regulatory Affairs Counsel Andrew Morris commented on the data saying, "NAFCU supports consumer protection but we have always maintained that the CFPB consumer complaint database is a flawed tool that poses significant reputational risk for financial institutions."
"As a sleek, agency-branded platform, the database gives a false impression that the CFPB has investigated complaints and determined that they are true," said Morris. "However, this is not the case, and the CFPB regularly publishes complaints that are not fully verified. Unfortunately, there is no process in place to assure that consumer complaints are fully vetted, and without an extra level of due diligence the database frequently operates as showcase for subjective criticism."
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What Is the CFPB and What Does It Offer Consumers?
The new Presidential administration will soon dissect the Dodd-Frank Act, a group of regulations the Obama administration developed in response to the 2008 financial crisis. Some political analysts expect them to disband the Consumer Financial Protection Bureau (CFPB). So what exactly is it, and what does it do for consumers?
Senator Elizabeth Warren proposed the idea for an agency like the CFPB in 2007 and, following the Great Recession, it was officially launched in 2010. In general, the CFPB's goal is to protect consumers by regulating banks, credit unions, payday lenders, mortgage servicers, and other institutions that offer financial products. Many of these institutions, particularly payday lenders, are notorious for preying on consumers. Some argue that it's up to the consumer to read the fine print and figure out how these products work on their own. This sounds simple enough, but the problem is that many of these companies make their terms deliberately misleading, so the CFPB was created to provide more transparency.
Especially now that the Bureau is in danger of disbanding, it helps to understand how it works. The goals of the CFPB tell you what you should be concerned about as a consumer.
Banks played a big role in the 2008 financial crisis thanks to subprime mortgage loans. To sum it up briefly, banks gave out massive loans to almost anyone, even if their credit was terrible and even if there was no way in hell they could afford to pay the loan back. This created a bubble that eventually burst. Housing prices in the U.S. fell almost 30% and the stock market fell by about 50%. We were smack dab in a recession.
"Well, people shouldn't have taken out those loans," you might say. Fine, but we're talking a global financial crisis here. The solution isn't quite that easy.
To prevent this from happening again, the CFPB created some rules and guidelines to keep consumers from borrowing more than they can afford and foreclosing on their home. Perhaps the most important among these is the ability-to-repay rule. This rule required lenders to consider a handful of different, crucial factors in approving the loan, a few of which include income, debt to income ratio, and employment status. In general, lenders now have to make sure you actually can pay back the loan. A few other mortgage rules the CFPB established to help consumers include:
Read the entire story at LIFEHACKER
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ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION
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