by Nick Taylor
The axe can fall anytime now on a government office that looks out for real people. That’s something that should concern all of us, regardless of our politics. Scams, rip-offs and bad practices can hurt Republicans and Democrats alike.
The Consumer Financial Protection Bureau (CFPB) has gone after financial predators of all kinds since the Obama administration and Congress created it in 2010.
Who uncovered the scam that Wells Fargo employees created fake accounts that cost consumers money? The CFPB. Who fined JP Morgan Chase for predatory mortgage lending practices? The CFPB. Who went after other big banks, smaller predatory lenders and stays on top of the credit reporting companies, debt collectors, for-profit schools and other companies and institutions that rip consumers off? The CFPB.
Just this week, the CFPB moved against what it called “a ring of law firms and attorneys who collaborated to charge illegal fees to consumers seeking debt relief.” They “exploited consumers who were already suffering financial difficulties by tricking them into paying steep, illegal fees,” according to CFPB Director Richard Cordray. It’s the second time the bureau has taken aim at the debt reduction scammers.
The new defendants in the CFPB’s federal court complaint are Howard Law, P.C., the Williamson Law Firm, LLC, and Williamson & Howard, LLP, and attorneys Vincent Howard and Lawrence Williamson.
A previous operation run by the two lawyers, Morgan Drexen, Inc., closed in 2015 after being sued by the bureau. The latest complaint says the defendants violated the Telemarketing Sales Rule.
Consumers who wanted help received two contracts from the attorneys. One promised debt settlement services, but the other was for bankruptcy-related services the bureau says the debtors hadn’t asked for. The bankruptcy contract let the lawyers collect illegal upfront fees amounting to tens of millions of dollars, according to the bureau, and often failed to settle any debts.
Mastercard and UniRush to $10 million to Consumers
Later in the week, the bureau ordered Mastercard and UniRush to pay RushCard users $10 million for foul-ups that kept cardholders from using their own money when a Mastercard unit started processing payments to RushCard holders in October 2015.
RushCard is a reloadable prepaid debit card. If payments don’t go into it, many users lack the funds to pay for necessities including food and rent. CFPB director Cordray said the two companies’ preventable failures “cut off tens of thousands of vulnerable consumers from their own money, and threw some into a personal financial crisis.”
In addition to the $10 million in restitutions, the CFPB ordered the companies to pay $3 million into its Civil Penalty Fund. We’ll tell you at the end of this post who gets a RushCard refund.
In the meantime, these continued examples show the valuable work the CFPB does fighting for consumers against predatory and just plain sloppy business models, and why the bureau should keep up its good work. But as we reported on ConsumerMojo last November, Republicans are gunning for Cordray, and would like to gut the agency entirely. That’s because they favor business interests over individuals, and those interests give to their campaigns.
Payday and other short-term lenders are particularly troubling. These companies make loans to people in distress. Military families and others who need money to get them over a hump offer up auto titles and other slim collateral in exchange for cash at high interest rates. Often the borrowers can’t pay on time, and the lenders are only too happy to extend their deadlines, adding fees and interest in the process.
Helping families in distress is a good thing. Taking advantage of them with fees and rates that amount to usury, and making loan after loan to take them deeper into debt they can’t afford is a bad thing.
Predatory lending by big banks had a lot to do with the financial crisis that started in 2008 and almost brought down the U.S. economy. Convincing people to take mortgages they couldn’t afford cost millions their savings, home equity, and even their homes. The big banking institutions that helped cause the crisis by bundling bad mortgages and selling them to gullible investors got bailed out.
The CFPB was one answer to the crisis. It was created as a watchdog against schemes, scams and just plain sloppiness that victimize consumers of financial products. It’s done a fine job. The bureau has levied fines on big banks as well as unscrupulous debt collectors and credit repair companies, and returned some $12 billion to consumers.
Cordray is a presidential appointee whose term runs until the middle of next year. He originally could be fired only for cause, but a recent court ruling changed that to say he could be fired at will.
That’s what Republicans in Congress would like President Trump to do. How he responds will say a lot about the promises he made to working class Americans during his campaign.
Will he keep those promises, or will he side with Congressional Republicans whose definition of freedom includes the freedom of businesses to fleece consumers?