The One-Year Anniversary of the CFPB
After quite a bit of very public debate, the Consumer Financial Protection Bureau (CFPB) came into place nearly one year ago to the day. The CFPB was created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act — popularly known as “Dodd-Frank” — and is responsible for enforcing consumer protection laws within the United States. While Republicans fiercely opposed the creation of the Bureau, presumably because they are against consumer protections, by some miracle the CFPB came into existence (the opposition did succeed in a small victory in not allowing Elizabeth Warren, the champion and arguable founder of CFPB, from leading the new bureau).
For its one year anniversary, the CFPB announced its first major enforcement action against the financial industry in the form of a $210 million fine levied against Capital One. While the bank was allowed to neither admit nor deny guilt — because for some bizarre reason companies that commit huge crimes are allowed to do that — essentially the CFPB said that Capital One was deceiving millions of its credit card holders into buying add-on services that are effectively expensive and useless.
What makes this even more important, as The New York Times’ DealBook blog astutely points out, is that this action now opens the gates for consumer class action lawsuits against Capital One and other banks that are likely behaving in the same way. The penalties between all banks could reach billions. That’s enough to get these behemoth companies to take notice, and to truly quit a behavior that lead to higher incomes for the wealthiest Americans at the direct expense of lower income Americans. All because a new “bureaucracy” was allowed to pass through the representatives of obstructionism and nepotism.
Business and politics are and forever have been very closely intertwined. Every election year they become closer. This is necessary for any free society, including the ability for companies to lobby local, state and federal governments. Successful businesses are important for a country, and capitalism is an effective system for creating wealth, but a fair and free market can only truly exist with the existence and proper enforcement of laws and regulations.
The CFPB came from just such a regulation (or “act,” technically). Many more are being proposed by the current administration. Remember this election year the debate has been framed as a choice between a faux-socialism lacking anything resembling socialism and a faux-free market devoid of any responsible oversight.
One of the two choices is better than the other. While the DD encourages all voters to make their own choice, we’ll give you a hint: it’s the side that doesn’t want large companies to be able to screw you over by selling worthless products.