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CFPB’s complaint system makes friends and enemies

Fred Williams

Capt. Will Jamison is in the minority of Americans who know about the Consumer Financial Protection Bureau.

As a judge advocate at Ellsworth Air Force Base in South Dakota, he called the consumer watchdog agency to get help for a service member. The unnamed airman was ordered to transfer, but couldn’t sell his house because the bank wouldn’t modify the loan.

“He was upside down – he owed more than the house was worth – and because of his orders, he had to leave the area,” Jamison said. Two weeks after the complaint went to the CFPB, the bank reversed itself. It agreed to let the house be sold for less than the outstanding loan, avoiding foreclosure.

“The CFPB absolutely helps service members take charge of their financial future,” Jamison said.

The testimonial, one of a collection of videos on the CFPB website, exemplifies the debate swirling around the embattled agency. Regulated businesses, including banks and debt collectors, aren’t fans of the bureau, and the complaint system is one of their major gripes. They say it smears them with unfair criticism.

But people who have used the complaint window – more than 700,000 so far – not only know the agency exists but many of them feel it is looking out for them in the jungle of consumer finance.

“People who’ve filed a complaint with the agency sure know what it does,” said Rohit Chopra, a former assistant director of the CFPB, currently a senior fellow at the Consumer Federation of America. “So many people have gotten refunds from the complaint system.”

Only 17 percent of consumers polled by CreditCards.com knew enough about the 5-year-old agency to voice an opinion about it. Among them, favorable opinions outweighed unfavorable by 3 to 1 overall.  Support among Republicans was lower, but they were still 2 to 1 in favor.

In addition to monitoring individual complaints the CFPB writes rules governing financial services, supervises larger banks and debt collectors, publishes studies and industry guidance, and fines companies for practices it sees as “unfair, deceptive and abusive.”

“Our job is to see that people are treated fairly in the marketplace,” Director Richard Cordray explained during a 2014 interview on “The Daily Show.”

“Good luck with that,” host Jon Stewart replied.

But the agency has succeeded, consumer advocates say. It has forced companies to refund about $11.8 billion to consumers for shoddy credit card marking, abusive debt collection and an array of other practices. Of the total, $7.7 billion came in the form of canceled debts and reductions in principal.

The goodwill built up by pro-consumer activity is important now, as calls to restructure the agency –  or even shut it down – grow louder. Following the election, deregulation-minded Republicans have the votes to stop new rules from the agency, cut its powers, or even shut off its funding.

Can the CFPB survive? Supporters are rallying consumers – and groups including the AFL-CIO and NAACP – to raise the political cost of dismantling the agency, a centerpiece of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

“We got it not because Wall Street compromised – we got it by fighting,” Sen. Elizabeth Warren said during a call with CFPB supporters in January. “Now it is easier – now it has a track record; it has allies.”

Warren’s tough rhetoric notwithstanding, policy analysts expect a compromise to emerge. Republicans busy with trade, immigration and health care reform may be stretched too thin to launch a legislative battle over the CFPB. That’s especially true when President Donald Trump can put a deregulation-minded director in place when Cordray’s term ends a little over a year from now. That prospect gives consumer advocates a reason to accept changes that limit the director’s power.

There is a full menu of ideas in Congress to reshape the agency short of shutting it down. Replacing its single director with a bipartisan board is among the options, as is narrowing its broad enforcement powers, exempting smaller banks and credit unions from supervision – and doing away with the complaint system. U.S. Rep. Blaine Luetkemeyer, R-Mo., head of a key subcommittee, said this week that a compromise bill is in the works which replaces the agency’s single director with a commission.

“I don’t think it’s going to go out of existence,” said Robert Pozen, a senior fellow at the centrist Brookings Institution.  The former Fidelity Investments vice chairman has a long perspective on policymaking, having served on presidential commissions and in former Gov. Mitt Romney’s administration in Massachusetts. “I think there’ll be a new head, with more accountability.”

Leadership by a board or commission would give the fledgling agency a broader base of support for its decisions. “These are difficult issues, and there are strong forces on either side,” Pozen said. While consumers need protection in the financial marketplace, overly broad rules can limit consumer choice, crimp lending and hold back economic growth.  “If you had a more diverse group, there would be a sense that things were fully aired.”

See related: CreditCards.com poll: Few are aware of embattled consumer watchdog, CFPB takes a closer look at alternative credit, CFPB lists our biggest complaints with credit cards

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