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CFPB - an agency you're going to miss [1]
['This Content Is Not Subject To Review Daily Kos Staff Prior To Publication.']
Date: 2025-01-16
I published this before but there was an interesting update with the CFPB going after Capital One. The recent cases were another eye opener.
Recent cases:
Jan. 7 Experian, one of the big 3 credit reporting companies for sham investigations of credit report errors
Jan. 6 Block, Inc. operates Cash App for allowing fraud to proliferate and closing cases of reported fraud without even starting a legally required investigation
Dec. 23 Walmart, Inc. and Branch Messenger, Inc. for payment system for Walmart store home deliveries fraud
Dec. 23 Rocket Homes Real Estate for kickback scheme to real estate brokers
Dec. 20 Early Warning Systems, aka Zelle - detailed below
Nov. 7 Navy Federal Credit Union for illegal overdraft fees
Oct. 23 Apple, Inc. for credit card scheme operating in Apple software in partnership with Goldman Sachs
Oct. 23 Goldman Sachs Bank USA
These are just a few of the trusted names that have been bad enough that the CFPB had to file complaints about them and return money to consumers.
And there's an update within an hour of publishing it this time.
Block, headed by Jack Dorsey, agreed to a $175 million fine, with $120 million of it for customer refunds. Only took 10 days for the CFPB to win. Wonder what made Block cave so quickly?
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Elon Musk and the Republicans want to eliminate the Consumer Financial Protection Board. They claim that it's financing is unconstitutional because it comes from the Federal Reserve without Congress' say so. There was a reason for that. The original intent for the Board was to keep it completely independent form political shenanigans.
Monied interests have a reason to be afraid of it, and are applying pressure wherever they can.
On Dec. 18th, they warned of credit card illegal rewards practices. Card companies have devalued reward points and flyer miles with bait-and-switch tactics. Luring customers into higher interest cards.
On Dec.13th, banks decided to sue the CFPB over new limits on overdraft fees. The banks laughably argued that the billions that they make in overdraft fees, "are an essential lifeline for consumers when they experience unexpected expenses."
"Without overdraft services, consumers on the margins are more likely to turn to less well regulated non-banking services to fill the gap."
So banks should be able to keep their $35 individual charge for an overdraft so that customers don't go to Payday lenders. Not really a good argument. Even with a $5 charge the CFPB wants to put in place, they still make money. Just not the ridiculous amount they've been getting.
CFPB Director Rohit Chopra replied, "For far too long, the largest banks have exploited a loophole that has drained billions from Americans' deposit accounts. The CFPB is cracking down on these excessive junk fees and requiring big banks to come clean about the interest rate they're charging on overdraft loans."
President Biden in January 2024, said, "Banks call it a service, I call it exploitation." All the banks have to do is follow the Truth In Lending Act.
On Dec. 20th, the CFPB sued Zelle, operating much like Paypal with a mobile app, and the banks behind it: Bank of America, JPMorgan Chase, and Wells Fargo, "for failure to protect consumers against widespread fraud." The CFPB alleges that consumers lost $870 million over the 7 years Zelle has been in existence, due to banks' failures to protect them.
Bank of America took umbrage to the complaint because 99.95% of the Zelle transactions go without incident. Okay, let's look at that. In 2023 they did $806 billion worth of transfers. And there were 2.9 billion transactions. That .005% leftover is 14.5 million transactions that did have incidents. I can't calculate the amount because each transaction would be a different amount. But 14.5 million invalid transactions seems to be an awful lot.
They allowed scammers to proliferate and failed to properly investigate customer complaints about Zelle.
The complaint noted, "Shortly after Zelle's launch, significant problems, including fraud being perpetrated on consumers using Zelle, quickly became apparent. But defendants did not take meaningful efforts to address these clear defects for years."
Zella put out its own statement. "The CFPB's attacks on Zelle are legally and factually flawed, and the timing of this lawsuit appears to be driven by political factors unrelated to Zelle." Political factors. What could they mean by that? Are they saying that they're being sued now before Trump comes into office? It's just a vague accusation and means absolutely nothing. They're guilty as hell.
In 2022, Zelle was censured in a Senate Banking Committee Hearing for not giving refunds to people who were tricked by criminals using Zella. It's not like they weren't put on notice two years ago. The company that operates Zelle is called Early Warning Services. It seems like they didn't use their own.
These are just two cases. On the CFPB website, there's a list of cases that is something of a who's who in the financial world. No wonder the billionaires and banks want to get rid of them.
Musk and Ramaswamy also want to get rid of the FDIC. The folks at MSNBC think both of them should watch the movie "It's a Wonderful Life," to understand what bank runs are all about, and why the FDIC exists.
There was a case in front of the US Supreme Court: CFPB v. Community Financial Services Association of America Limited. They were, once again, challenging the funding of the CFPB to prove it unconstitutional and invalid to operate. Analysts said the decision by the Fifth Circuit was fundamentally flawed. A ruling against the CFPB would affect other government financial agencies. A negative ruling by the Supreme Court would be a prime example of judicial overreach. The CFPB won on May 16, 2024. The Supreme Court did something right for once.
Republicans coming into power are threatening to curtail the CFPB through legislation to restrict its actions and changing its budget financing. The Chairman of the Board can be appointed or removed by the President. The Deputy Director is appointed by the Director. Rohit Chopra is currently the Director, and Zixta Martinez is the Deputy Director. There are approximately 1500 employees. Once Trump in power watch for news about the CFPB. Once again, people may get caught flat-footed by ignorance of what the agency does. If Trump or Musk, the real President, says the agency is bad, they might believe it and all of us will fall victims to the banks and services that are out to fleece us.
Yahoo! Finance News:
Rohit Chopra may not have much time left as the Director of the Consumer Financial Protection Bureau, with Donald Trump preparing to assume the presidency. But the regulator has been making the most of his likely final months on the job, telling Congress recently that he didn't think there was any reason for the agency to act like a "dead fish." Back in December, CFPB debuted a new credit card comparison tool using data the agency collects that, in theory, could offer an alternative to commercial sites that it argues often rely on kickbacks or affiliate marketing.
Yahoo! Interviewed Chopra:
"Even when you consider the Fed's interest rate hikes, those credit card interest rate hikes went far beyond that."
When asked about how credit card companies were getting away with price gouging:
"Some of them range from the real-in-the-weeds type practices, like how they're changed their credit reporting to obscure to their competitors who their most profitable customers are, to things that are much more out in the open." Rewards cards "created a market environment where interest rate is less salient, and the interest rates people are paying often wipe out way more than the value of the rewards."
"We have department stores out there that are largely staying afloat because they're churning credit cards." "I'm really concerned that the structure of credit cards today creates a financial incentive for credit card companies to push consumer into a treadmill of debt." "We've done work and issued policy about rigged comparison sites. We think comparison tools are important, but when the results are rigged, it ends up steering customers into cards that are more profitable to the comparison website."
He said that even flight attendants are being pressured into selling credit card services to increase their compensation.
A prime example of credit card fraud was when Wells Fargo created fake accounts for people that had no idea that they'd been generated in their name.
Donald Trump talked about interest rate caps during the campaign, but knowing Trump, it would only be capping the high rates that are there now.
Back in May of last year, the CFPB warned about buy now and pay later schemes:
Buy now, pay later companies must provide consumers with the same legal rights and protections as credit card lenders do. That includes the right to demand a refund, and to dispute transactions. Buy now, pay later loans are typically marketed as zero interest or low interest, and allow consumers to spread out payments over weeks, or months. In a report, the CFPB found that more than 13% of buy now, pay later transactions involved a return or dispute, and in 2021, people disputed or returned $1.8 billion in transactions at the five companies surveyed.
On January 14th, the CFPB sued Capital One for their supposed high interest savings accounts and bilking customers out of $2 billion.
Capital One froze the service at a low interest rate for their "360 Savings" accounts, while rates increased across the country. Then they created a "360 Performance Savings" account and didn't let the original 360 customers know and told employees to not tell them.
"Banks should not be baiting people with promises they can't live up to," Director Chopra said.
Capital One of course said they would vigorously defend themselves in court. They also accused the CFPB of filing 11th-hour lawsuits ahead of a new administration.
The problem is that Capital One has been caught red-handed. The 360 Savings accounts have a 0.5% interest rate, and the 360 Performance Savings have a 3.74% interest rate. Their 360 Savings accounts were stuck at 0.3% from 2020 to 2024. 360 Performance Savings accounts started at 0.4% and went as high as 4.35% in early 2024.
Despite the change in administrations, the litigation still might survive. I wouldn't bet on it with the desire to do away with the CFPB altogether.
This is the agency that Elon Musk and Vivek Ramaswamy want to get rid of. It's like saying, "we want you to pay more, we want you to get ripped off." That's what banks want the right to do. Get rid of the CFPB and you lose your advocate against credit crime.
Put that together with the intention to dissolve the FDIC and you can see where this is going for monied interests. They want a wild, wild west of bank and credit company deregulation, so once again, the rich get richer, and the poor get poorer.
We really can be thankful that the CFPB does exist. We need to make sure it never gets disbanded by those who are regulated and pursued by it.
The CFPB is in the sights of the Trump administration. Elizabeth Warren helped create it, and you can bet she will fight against any attempt to get rid of it. There is so much happening every day about the damage that is planned by Trump and his cohorts that news coverage could easily be lacking.
The motto of the CFPB is: "On your side through life's financial moments." Nice thought. At least it was.
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