Home > 2015 > Personal Finance

4 Years Later, Congress Still Debates Consumer Watchdog’s Future

Advertiser Disclosure Comments 0 Comments

Hidden fees, penalties, surcharges and other “gotchas” drive consumers bonkers, but some companies love them. In the years leading up to the financial crisis, many credit card issuers and other lenders had created a labyrinth of complex fee charts that confused borrowers and made for easier profits. In the aftermath of the Great Recession, Congress passed sweeping financial reform with the intention of preventing another systemic financial collapse. Known as Dodd-Frank, the law included hundreds of new rules governing the way Wall Street works, but to regular consumers, the law’s most visible provision involved the creation of the Consumer Financial Protection Bureau. The agency’s chief task was to make sure financial products were rid of gotchas, or “tricks and traps,” as CFPB inventor and now Massachusetts Senator Elizabeth Warren liked to call them.

On Tuesday, Dodd-Frank hit its fifth anniversary, and the CFPB celebrated its fourth anniversary. But not everyone is coming to help sing “Happy Birthday.”

“In a very short time, we have done new and important work,” CFPB directly Richard Cordray said Monday. The agency says through various enforcement actions, it has helped get refunds or other kinds of relief to 17 million Americans — $10 billion worth of relief.

But at what cost? Dodd-Frank and the CFPB have vocal critics who say the new regulations it has created have hurt both small lenders and consumers, ultimately making the economy less stable.

During a hearing before the House Financial Services Committee marking the anniversary this month, some argued CFPB rules have led to decreased access to traditional credit products, which forces low-income consumers to used more expensive lending products.

“In the five years since the law came into effect it has resulted in higher prices and reduced choice for consumers and has done little to increase consumer financial protection,” said Todd Zywicki, George Mason University law professor and frequent CFPB critic. “That Dodd-Frank squandered this historic opportunity to modernize and reform consumer protection laws for the benefit of consumers was, therefore, particularly disappointing.”

Jeb Hensarling, a Texas Republican House member from who serves as the chairman of the House Services Committee, said the elimination of many free checking accounts is one example of the CFPB hurting lower-income consumers.

“Before Dodd-Frank, 75% of banks offered free checking. Two years after it passed, only 39% did so,” he wrote in a Wall Street Journal op-ed. “Bank fees have also increased … leading to a rise of the unbanked and underbanked among low- and moderate-income Americans.”

A 2013 FDIC survey found that 13.4% of households said the main reason they were unbanked was because fees were too high or unpredictable, while 35.6% cited not having enough money to have an account.

Zywicki made a similar point at the hearing.

“The CFPB found a significant decline in the percentage of households that had (credit) cards, from 76% to 71%,” he said. “Loss of access to credit cards has forced those consumers into great reliance on higher-cost products.”

During a hearing last week, Senate Banking Committee chairman Richard Shelby (R-Ala.) called for Congress to restructure the CFPB so that it has control over the bureau’s spending and to have “the ability to conduct meaningful oversight.” Sen. Sherrod Brown (D-Ohio) countered that such a restructure would weaken the CFPB.

The CFPB points out that 650,000 consumers have filed complaints with the agency during the past four years, and that many of those consumers would have been unable to complain effectively before the agency’s birth.

In Monday’s speech, Cordray told one such story from a consumer named William:

“We heard from William, who was receiving calls for a debt he did not owe. William tried to resolve the issue for more than four years, and saw his credit being ruined in the process. He said, ‘None of them could do anything … except tell me I had to pay them the $8,500.’ But because he submitted a complaint to us, he was able to end the prolonged standoff in just one week,” Cordray said. “Every success of this kind is a thrill for us. One consumer tagged her story about the relief she and her husband got from our handling of a mortgage complaint with the theme from Mighty Mouse: ‘Here They Come, to Save the Day!’ We all got a good laugh out of that one, but it was also poignant because apparently it was exactly how she felt.”

More Money-Saving Reads:

Image: Progress Ohio, via Flickr

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