Thanks to the work of the Consumer Financial Protection Bureau (CFPB), Shirley Banks of Greenville, Miss. received a $1,000 check in the mail in 2016.
Hundreds of thousands of other people got help from the CFPB, too. But today’s leadership of this vital agency is demonstrating how government can abandon the goals Congress set out for it, and betray the people it should protect.
Kathleen Kraninger, who has helmed CFPB for a scant four months, is unfortunately already making a name for herself as someone willing to let the bad guys off the hook. She is a protégé of Mick Mulvaney, who spent much of 2018 doing his best to lay waste to the CFPB’s work and structure as its acting director.
In late January, Kraninger signed off on a settlement with loan broker Mark Corbett for defrauding veterans. Corbett misled ex-servicemembers into signing contracts with questionable interest rates and repeatedly lied to them to gain direct access to their hard-earned pension payments.
Kraninger also recently approved a settlement against online payday lender Enova International Inc., which had illegally debited funds from customer accounts without permission.
Neither settlement offered refunds or restitution for wronged consumers and imposed limited monetary penalties, making it easier for companies to treat CFPB settlements as mere slaps on the wrist that come with doing business.
As noted in a recent report by the Consumer Federation of America, Kraninger so far has settled almost every deceptive practices case without providing a single dollar of compensation for harmed families. Call it the “Kraninger Discount.”
Banks is a former customer of Morgan Drexen, a company that promised to help manage consumers’ debt but in reality charged explicitly prohibited fees and lied to customers about its services. Banks lost about $1,000 in her dealings with Morgan Drexen and shared the details of her bitter experience with the CFPB.
In 2013, the CFPB filed a lawsuit against Morgan Drexen, and contacted Banks to hear her story, which the agency documented for the court.
After three years of litigation, the CFPB won its case, and the court ordered Morgan Drexen to pay $132 million in restitution to consumers. Banks received her money back.
From 2011 to 2017, under the leadership of its former director, Richard Cordray, the CFPB used its powers on behalf of everyday consumers like Shirley Banks. It imposed fair rules of the road for credit and prepaid cards, mortgages and more, reining in the worst abuses and lawbreaking conduct.
The bureau identified and addressed some of the most predatory practices in debt collection, credit card, credit reporting, student lending, payday loans and auto financing.
Before Mulvaney, restitution was a key component of the CFPB’s enforcement. The bureau recognized that injunctive relief without compensation does not provide redress for harmed consumers. The CFPB won back:
- $1.8 billion from Citibank, Bank of America and JPMorgan Chase for misleading consumers into buying expensive and worthless credit card “add-on products;”
- $125 million from Ocwen for systematic mortgage servicing misconduct; and
- $80 million from Ally Financial for discriminatory auto loan pricing.
From 2011 to 2017, the CFPB returned nearly $12 billion in refunds or reduced debt for 29 million Americans, providing them with tangible relief.
The financial damage of a dormant, distant CFPB to American families is growing every day. Debt collection abuse is a leading source of consumer complaints that the CFPB receives almost daily.
Previously, the bureau took a number of actions to combat the widespread lawlessness in the debt collection industry.But in the last year, debt collection violations resulted in modest civil penalties but no relief for consumers.
The bureau charged debt collector National Credit Adjusters, LLC with inflating amounts of debts owed and threatening consumers with lawsuits and arrests and charged online retailer Bluestem Brand with substantially delaying reporting of consumers’ payments of their debt to debt buyers.
Despite the serious financial harm consumers suffered from these practices, the CFPB did not require either entity to provide any compensation to their victims.
Director Kraninger must decide whether she’s on the side of Shirley Banks or the scammers who ripped her off. She can follow the lead of the mighty financial services industry to abandon CFPB’s mission to protect consumers and stop enforcing the law, or she can make government work for the public, not just the powerful.
Linda Jun is senior policy counsel for Americans for Financial Reform. Christine Hines is legislative director at the National Association of Consumer Advocates.