This is an archived article that was published on sltrib.com in 2017, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
Earlier this month, Republican U.S. Rep. Mia Love sided with Wall Street banks, payday lenders and corporate lobbyists over the interests of her Utah constituents. Love serves on the critical House Financial Services Committee and voted in favor of a massive, dangerous repeal of our nation's banking and consumer protection laws.
By way of background, after America's banking industry collapsed in the subprime mortgage crisis, Congress passed laws requiring that banks and other large financial companies engage in stress testing and develop emergency plans to avoid bank bail-outs. Congress also established a new consumer protection agency, the Consumer Financial Protection Bureau (CFPB) and charged it with rooting out unfair and deceptive practices in home mortgages, credit cards and other financial products such as payday loans. Congress funded the small agency (which has fewer employees than a typical high school has students) through revenue produced by the Federal Reserve banks instead of taxes and gave it an independent director to call the shots.
Since the crash, the CFPB has rebuilt American mortgage lending laws to stop the worst excesses of the bubble years while still preserving widespread access to home mortgage loans. The CFPB also focused on holding banks and other financial companies accountable if they lie to consumers.
In law enforcement cases, the CFPB has returned over $12 billion in consumer refunds and has forgiven debts to Americans who were cheated by illegal practices. Most recently, the CFPB caught Wells Fargo fraudulently creating over 2 million fake bank accounts without consumers' permission.
The agency has also proposed new compromise rules on payday lending. Payday lenders make loans with average interest rates of 450 percent per annum that often trap struggling consumers in a vicious cycle of debt. That's why these loans are currently prohibited in many states and were illegal in Utah prior to the 1980s. In states like Utah, where payday lending is legal, the CFPB's proposal would require lenders to verify that their customers have the ability to repay before making triple digit interest rate loans.
But in President Donald Trump's new administration, a feeding frenzy of banking industry lobbyists has swarmed Washington, trying to make it easier for the consumer finance industry to rip off its customers. Among other things, the bill, HR10, would eliminate stress testing and emergency planning requirements for many of the largest financial institutions. The bill also cuts the CFPB's independent source of funding, which could allow lobbyists to hobble the agency with annual threats to its funding.
Ironically, the bill also renames the CFPB the "Consumer Law Enforcement Agency," even though it cynically erects logistical hurdles designed to cripple actual law enforcement efforts. For example, the bill eliminates the CFPB's authority to conduct audits of large banks and other financial companies. And it imposes the absurd requirement of an exhaustive economic study every time the agency opens a law enforcement case. The bill even creates a special exception prohibiting any law enforcement cases against payday lenders. Most astonishing, the bill actually eliminates the federal prohibition of "deceptive acts or practices" that the CFPB has used in court to provide over 90 percent of its restitution to the public because, apparently, we need more deception in the consumer finance industry?
If HR10 passes, the average Utahn will soon face more tricks and traps in managing their finances. Sadly, Love and Trump have catered to the worst impulses of the financial industry at the expense of voters. Now the bill is moving to the floor of the House, where Reps. Rob Bishop, Jason Chaffetz and Chris Stewart, and then eventually Sens. Orrin Hatch and Mike Lee, will have a chance to put their constituents ahead of special interests. Let's hope they do.
Christopher L. Peterson is the John J. Flynn Professor of Law at the University of Utah and served as a special adviser in the director's office of the Consumer Financial Protection Bureau.