Your Financial Protection is in Jeopardy

            Every now and then there will be a story from the media about a new scam impacting consumers. Not all of them are obvious. There is a whole industry in the financial sector that preys on poor, vulnerable, and desperate folks looking for a way out of a potentially catastrophic financial situation.

            Often these potential catastrophes are caused by an unanticipated illness, an arrest or violence, or simply job loss. Absent a robust public safety net for folks impacted by episodic calamities, most people have to turn to the private sector for assistance. And the private sector provides that assistance in the form of payday loans, foreclosure relief, and debt avoidance service providers.

            But much of the industry has been historically unregulated and plagued by what some view as unethical business practices. When desperate folks turn to these places for help, they can wind up in worse shape than they were before they sought the help.

            In 2011 Congress passed legislation creating the Consumer Financial Protection Bureau. The Bureau’s goals were laudable: it was designed to protect consumers who might be subjected to unscrupulous financial deals from predatory financiers. Preying on the poor is in nobody’s interests as it simply perpetuates cycles of poverty.

            The bureau was created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act that passed following the 2008 Great Recession economic collapse brought on by unregulated securities sales.

            After the bureau was created, it brought about a great deal of skepticism from the bankers and financiers that it was designed to regulate. They seemed to be allergic to oversight and sought to avoid any accountability for their actions that brought down the economy and sent hundreds of thousands of folks into dire financial straits at the close of the naughts.

            Since its creation, the Bureau has been targeted by money interests for a great fall. It seems that persistence may have finally paid off for the financiers and bankers. Last week a three-judge panel of Trump appointees on the Fifth Circuit Court of Appeals in New Orleans ruled that the bureau has been unconstitutionally funded since its creation over a decade ago, thus calling into question all of the work that it has accomplished on behalf of consumers since its creation.

            Unlike other federal agencies, the bureau is funded by the Federal Reserve rather than through Congress. The funding mechanism was created to ensure that the agency would not be rendered impotent due to lack of funding by any political party when it gained control of the appropriations process in Congress. And for more than a decade the funding mechanism was successful, allowing the bureau to perform its important work on behalf of consumers.

            The bureau has acted to ensure transparency and fairness in credit markets for all Americans including with respect to mortgages, credit cards, and student loans. It has successfully recovered $12 billion for 29 million consumers who have been harmed by abusive debt collection and lending practices.

            As a result of the court’s ruling last week, the bureau’s continued existence is now in jeopardy. The bureau can appeal the ruling to the full court, or take an appeal to the U.S. Supreme Court. For now though, the prospects of it continuing as an agency to assist consumers is in jeopardy.