D.C. Circuit Court Attempts to Thwart Consumer Protections

 By Renato R. Rocha, Policy Analyst, Economic Policy Project, NCLR

Last week, the U.S. Court of Appeals for the DC circuit decided against the Consumer Financial Protection Bureau (CFPB), making it easier to remove the director, who serves as head of the Bureau. If the decision stands, it will undermine what the CFPB was created to do in the aftermath of the Great Recession—protect consumers—since the director could be removed by the president without cause.

A challenge to the director’s authority is a challenge to CFPB itself. Since the CFPB opened its doors five years ago, it has become clear that the Bureau is exactly what consumers needed, and consumers overwhelming support its work. The CFPB now has authority to regulate a range of industries that previously lacked transparency, including remittance transfers, credit cards, student loan servicing, and payday loans. In order for the Bureau to continue its essential work on behalf of families, the CFPB needs to remain autonomous.

Bad actors and predatory practices that threaten the financial security of hardworking families cannot be tolerated. Many households, particularly communities of color who were hardest-hit when the housing bubble burst, are still struggling to recover from the recession. The CFPB’s enforcement actions that help ensure a more equitable financial marketplace are particularly important for communities of color. Over the last five years, the CFPB’s enforcement actions have brought $11.7 billion in relief to more than 27 million consumers. About a dozen of these actions demonstrated clear evidence of restricting access to or charging minority borrowers more for products and services.

In addition to these critically important enforcement actions, the CFPB is also reining in deceptive financial products. The CFPB recently issued final rules to protect consumers using prepaid cards. As several studies indicate, Latino families use prepaid cards to control spending and as a means to gain access to online markets. Yet, prepaid cards are new enough that they were unregulated until recently, and currently lack some much-needed consumer protections. Based on a survey of NCLR Affiliates who serve nearly 50,000 Hispanic families annually, Latino consumers report issues with prepaid cards related to card fees and transparency. Under the new CFPB rule, consumers will be better protected against fraud and hidden charges.

The new prepaid card rule and the dozen others that the CFPB has issued since its inception are examples of how this agency is making the financial marketplace more consumer-friendly. In the coming months, we hope that the DC Circuit Court decision will be appealed and overturned. American consumers, especially communities of color, need a federal agency that will stand up for them. Preserving the CFPB’s authority and independence to continue its important work on behalf of consumers will be essential to ensuring that low-income families and communities of color have equal opportunities to maintain and build wealth.