Tags: cfpb | supreme court | consumer | financial | protection

CFPB Overreach Hurting, Not Helping, Consumers

CFPB Overreach Hurting, Not Helping, Consumers

By    |   Friday, 14 June 2024 03:22 PM EDT

Those who have been keeping a watchful eye on all things consumer finance are aware of the recent news that has surfaced following the Supreme Court’s decision to classify the Consumer Financial Protection Bureau’s (CFPB) funding mechanism as constitutional.

But, contrary to popular belief, this ruling only proves that Congress needs to put the reins on the CFPB and control its outrageous overreach that will harm consumers and small businesses. In fact, it is imposing regulations so burdensome that many small business lenders are left confused and unsure where to turn next.

The mandate of the CFPB is to formulate policies that safeguard consumers and provide clear guidance to consumer credit firms. However, the complexity and ambiguity of its recent policies pose a risk of limiting access to credit for millions of consumers, particularly at a time when the need for credit is crucial for many Americans.

The CFPB’s regulatory brigade has created a climate of uncertainty within the consumer finance industry. A notable example is a rule finalized in March, which sets a cap of $8 on late fees for credit card companies. However, there appears to have been an oversight by the CFPB regarding the broader impact of this rule, particularly on small business lenders. These lenders have expressed legitimate worries about how this cap may affect the creditworthiness assessments of their future borrowers.

Aside from the concerns raised by lenders, taxpayers should also rightfully be wary of the rule. The regulation practically encourages borrowers to pay their bills late and leaves the ones paying on time left to pick up the cost.

The consumer finance industry is in dire need of transparent and straightforward regulations because of the uncertainty that CFPB is injecting into the market. It’s essential that consumers have and maintain access to the necessary credit they need to make ends meet – especially in this era of sky-high inflation. Yet the CFPB has been consistently blurring the lines of what is and isn’t allowed from small credit lenders, making its burdensome regulations nearly impossible to follow and wrapping consumer lending in unnecessary confusion and red tape.

It is easy to recognize the severe burden of the CFPB’s regulatory overreach. This year alone, the CFPB has attempted to dip its toe into monitoring automotive loans and finances, video game marketplaces, and mortgage lenders. All of these came about with very little warning to relevant markets. More importantly, the CFPB has neither the scope nor the mandate to do so.

It appears that the CFPB is struggling to manage its regulatory regime effectively. Concerns have been raised about its capacity to govern its internal processes. It’s why the Supreme Court took notice of a lawsuit brought by the Consumer Financial Services Association of America, Ltd (CFSA) against the CFPB in the first place. The case questioned the constitutional validity of the agency’s autonomous funding mechanism, which was ruled constitutional.

In addition to the scrutiny over its questionable and unique funding structure (which is solely under the purview of the Federal Reserve), the CFPB has been embroiled in an internal wage conflict since December. The agency failed to adequately adjust salaries for its employees. Instead, it opted to raise "pay bands," meaning the salary brackets for various levels of employment, which typically benefit upper-level management. This decision sparked discontent among CFPB staff members who did not experience a corresponding increase in their wages.

While the intention behind the creation of the CFPB was to protect consumers, its current operations have strayed far from this goal due to overregulation and lack of accountability. The apparent absence of sufficient oversight has resulted in the establishment of a federal agency that lacks adequate safeguards for consumers. It’s time for lawmakers to recognize the pressing need to bring the CFPB back under the watchful eye of Congress.
David Williams is the president of Taxpayers Protection Alliance.

© 2024 Newsmax Finance. All rights reserved.

Those who have been keeping a watchful eye on all things consumer finance are aware of the recent news that has surfaced following the Supreme Court's decision to classify the Consumer Financial Protection Bureau's (CFPB) funding mechanism as constitutional.
cfpb, supreme court, consumer, financial, protection
Friday, 14 June 2024 03:22 PM
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