Home > 2011 > Personal Finance

Senate Republicans Block New Consumer Watchdog

Advertiser Disclosure Comments 0 Comments

Senate Republicans made good on their promise to block Richard Cordray from becoming the first permanent director of the Consumer Financial Protection Bureau Thursday morning, in a vote that promises to keep consumers’ rights in limbo at least through the 2012 elections.

Cordray, formerly the attorney general of Ohio and now the bureau’s enforcement chief, was President Obama’s nominee to lead the bureau, which now is led by an acting director. Cordray won a majority of Senators, with 53 votes for and 45 against.

But Presidential nominees need 60 votes to win. With votes falling on strict party lines, Cordray failed to clear the supermajority hurdle. Only two Republicans broke ranks, and the backstory behind those votes is telling. Scott Brown of Massachusetts voted with Democrats to end the debate. Brown faces a potentially tough reelection campaign against Elizabeth Warren, who originally created the idea of the bureau, lobbied for its creation and served as the president’s assistant in charge of setting it up.

[Read our coverage on the Consumer Financial Protection Bureau]

The other quasi-dissenter was Olympia Snowe, who voted “present.” The Maine Republican also faces a tough reelection campaign, a fact that the Obama administration tried to exploit this week by sending officials to Maine to campaign on Cordray’s behalf.

Democrats blasted the Republicans for opposing Cordray’s nomination.

Sen. Sherrod Brown (D-Ohio) told the L.A. Times that “more than 40 of my colleagues chose Wall Street special interests over Main Street consumers. They should be ashamed of themselves.”

Republicans countered that their opposition to a director would remain until President Obama agreed to several changes that would reduce the bureau’s power, including replacing its single director with a five-member committee, and giving Congress direct control of its budget.

“This notion that we’re against consumer protection, that we’re trying to gut the CFPB is just silly,” Sen. David Vitter (R-La.) told the L.A. Times. He said the structural changes were intended to limit the bureau’s “unbridled, unprecedented authority.”

[Resource: Get your free Credit Report Card]

As long as the CFPB remains without a full-time director, its power to enforce consumer protection laws is significantly limited. Among the things the bureau can’t do:

– According to a January report by the Treasury department’s inspector general, without a permanent director the bureau is powerless to prohibit “unfair, abusive or deceptive practices.”

– The bureau can suggest ways for financial institutions to make their products and contracts more user-friendly, like mortgages and credit card contracts that regular people can actually read. But it can’t force the institutions to make those changes.

– The bureau cannot enforce existing laws regulating the following industries:

  • The entire mortgage industry, including subprime loans, securitization, servicing and title registration. The industry’s push to make short-term fees from subprime mortgages without regard for those loans’ long-term viability was a major cause of the 2008 financial meltdown, according to the Financial Crisis Inquiry Commission’s final report.
    Payday lenders, which on average charge fees equal to roughly 400% APR, according to the Center for Responsible Lending.
  • Student lenders and for-profit schools, many of which have been accused of driving students into debt with little regard for whether students will ever be able to graduate or repay their loans, thereby trapping dropouts in a never-ending cycle of debt (since student loans are the only form of debt not wiped clean by bankruptcy). We covered this issue here.
  • Pawn shops, rent-to-own stores, Wal-Mart financial centers, and other high-fee financial services companies.
  • The credit scoring industry, which many researchers have found to be plagued by inaccurate information on consumers, a lack of transparency, and no effective means for consumers to correct information, as we covered here.

[Featured Product: Research and Compare Credit Card Offers on Credit.com]

Image: patentboy, via Flickr.com

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team