Why we need the new Consumer Financial Protection Bureau
Jon Bartholomew
[Editor's note: Today, we welcome Jon Bartholomew to the ranks of our regular contributors. He advocates for consumer protection and government transparency at OSPIRG. He's a long-time campaign finance reform advocate as well. Full bio here.]
If anyone had any doubts as to why we need the new Consumer Financial Protection Bureau (CFPB), a new news story should spell it out nicely. On Yahoo today, in collaboration with the Wall Street Journal, there is an article about the new tricks and traps that credit card issuers are coming up with now that the CARD Act is law.
I don't think it comes as any surprise that the big banks would start jacking up annual fees, but boy are they getting creative when they come up with new kinds of cards (like "professional" cards) that they market to individuals but aren't regulated by the CARD Act, or they come up with huge up-front fees they charge people before a credit card account is even opened.
And they wonder why they have a lower approval rating than Congress!
But this is the great thing about the new Wall Street Reform and Consumer Protection Act. It creates the new CFPB that will have the power to watch over consumer financial products and come up with new rules to rein in new tricks and traps. As credit card issuers get creative, the CFPB will be there to keep an eye on these new practices to make sure they don't go too far.
Before this, we didn't have an agency that was looking out for consumers' interests in financial products. We had an agency that keeps an eye on food safety. We had an agency that keeps an eye on product safety. In fact, recently, the CPSC recalled some tiki torches for a laceration hazard. Mind, you, this product is essentially "fire on a stick" and we had an agency recall it for a risk you might cut yourself. But if you were at risk of losing your life savings because of a shady banking practice, there was no agency looking out for you. Consumer protection was a second thought at several different agencies, whose primary purposes were to help the financial industry. So now, we will have efficiency in that it is at one agency, and it will be that agency's top priority.
Greed is a powerful thing, and no matter what laws like the CARD Act are passed, people will try to find new ways to take advantage of others. Now that the CFPB will be looking out for us, we have a powerful new tool to keep the marketplace fair.
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1:46 p.m.
Aug 3, '10
Thanks for the welcome message! I appreciate being able to contribute to this site.
2:10 p.m.
Aug 3, '10
Just this past week, after having a Citibank Credit Card for over a decade, and which I have maintained a zero balance on for the past 3, Citi felt compelled to add a new $60 membership fee for the "privilege" of having a $13k credit line. Needless to say they lost a decade long customer.
Granted they have that right to lose customers to their hearts content, but these "high-finance" clods really just don't get it.
2:26 p.m.
Aug 3, '10
I think they don't realize that consumers are getting more savvy and they can't control people the same way they used to.
All the folks at credit unions I have spoken to say they are getting wave after wave of people moving their accounts from the big banks.
3:58 p.m.
Aug 3, '10
Yes, the Move Your Money project--which is heavily promoted on Huffington Post has done exceedingly well. People are waking up.
So few people understand our banking system. I encourage folks to read Ellen Brown's Web of Debt. It is eye-opening.
Krugman's editorial this morning in the Oregonian continues to expose how out of touch our financial system is. We will need to create new solutions. I think a State bank--working cooperatively with smaller, local community banks would give OR a powerful way to disengage from the clutches of Wall Street
6:36 p.m.
Aug 3, '10
Be very careful when estimating the wisdom of the average U.S. consumer. Just when I think that bar cannot be set any lower it's time to re-engineer the whole mechanism. "Savvy" sure as hell isn't an apt description based upon my recent observations.
Echoing Mitch, I have canceled two credit accounts recently for the same reason. The bankster's are merely testing the waters to see what they can get away with after a regulatory slap on the hand. Tell 'em all to go to hell. Dump checking/savings accounts with the huge multinationals and go with a local credit union or an Umpqua Bank or Sterling Savings. Do we really need to create another bureaucracy to save us from ourselves?
7:56 p.m.
Aug 3, '10
Brian, this is REDUCING bureaucracy for greater effectiveness. And it's less to save us from ourselves and more to give us collective power with which to stand up to the power of the large corporations.
12:24 a.m.
Aug 5, '10
Moved our accounts from WaMu to Western bank about 12 years ago. Then WaMu bought Western! Lived w/it until 2008 and moved again to Premier West, an Oregon bank. The last thing we need is a state bank. just support local banks and credit unions.
I also had a love note from Citi last october upping the interest rate significantly and doing away with the 30 day float. Cancelled after 10 years.
9:27 a.m.
Aug 5, '10
State banks do support small, local banks and credit unions--they work collaboratively. What many people don't realize is that the 'big banks' have a stranglehold on the small banks...and must of the funding we need to foster small businesses, farming etc., is not happening because of this power game.
Adding a State bank would give us other options we don't have right now.
8:22 p.m.
Aug 3, '10
Understand where you're coming from but ultimately it comes down consumer choice. I have no predisposition to hate large corporations. Their job is to increase their bottom line. I have no empathy for the American consumer who does not. Caveat Emptor.
9:06 p.m.
Aug 3, '10
the average consumer does not have the same amount of power large corporations have, and the market is not nimble enough to provide consumers with alternatives everywhere. Consumers have a right to find a way to balance the power (that's part of market theory), and government is the tool we use collectively to do that.
8:43 a.m.
Aug 4, '10
It is interesting to note that wing-nuts, most resistant to any kind of consumer protection regulations, are themselves the frequent victims of scams, especially those involving finances, insurance, and phony tax shelters. A good case in point is Glenn Beck's gold buying scam. My poor mother-in-law easily qualifies in the wing-nut lunacy category. She was scammed into buying an annuity that doesn't reach the break-even point until she is 103. At an earlier time in her life she was scammed by an bible thumping evangelist into an investment fraud scam. She was so filled with shame about it, and so averse to turning in a preacher to the authorities she never filed charges. Nevertheless she continues to buy into the line of right wing garbage that she is fed through her bible thumping church that she is one of those who can readily deny that her precious medicare really is a government program.
7:03 p.m.
Aug 4, '10
I hear ya' Bill as I too have an elderly mother. Know to leave well enough alone unless major purchases or investments are involved. At that point I'll step in as there is no shortage of sales folks happy to take advantage of a trusting soul with a few dollars in the bank. Still comes down to Caveat Emptor though as neither I or government should be able to squelch the free will or another barring mental impairment. On the subject of gold, wish I'd have poured plenty of my $$$ into that 10 years ago but certainly wouldn't have gone your mom's route. If what you say is true, there are much better ways to invest in precious metals and who buy's what Glen Beck is plugging? Did I already mention Caveat Emptor? I digress.