Consumer bureau chalks up victories

Ben Carson, second only to Donald Trump in Republican presidential polling, has called the Consumer Financial Protection Bureau the "ultimate example of regulatory overreach."

Candidate Carly Fiorina, former chief executive of Hewlett-Packard, says the watchdog agency's investigative powers worry her "a whole lot more" than the National Security Agency.

And Texas Sen. Ted Cruz, also seeking the Republican nomination, introduced legislation in July that would erase the bureau from existence.

"The agency continues to grow in power and magnitude without any accountability to Congress and the people," he warned. "The only way to stop this runaway agency is by eliminating it altogether."

So what acts of villainy has the Consumer Financial Protection Bureau been up to lately?

Despite the ominous, fearful and largely bogus criticism by its Republican critics, the bureau has been steadily doing what it was created to do: safeguarding consumers from the greedy practices of businesses that think they can act without regard for the law.

Last week, the bureau announced a crackdown on the nation's two largest debt buyers — companies that purchase uncollected debt for pennies on the dollar and then try to squeeze payments from consumers by threatening lawsuits and damage to credit ratings.

One of the companies, Encore Capital Group, is based in San Diego. The other, Portfolio Recovery Associates, has its headquarters in Norfolk, Va.

Richard Cordray, the bureau's director, said the two companies bought thousands of consumer-debt accounts "that they knew or should have known were inaccurate or could not legally be enforced" because the files lacked required documentation.

Nevertheless, he said, the companies filed lawsuits against people "knowing that they would win the vast majority of the lawsuits by default when consumers failed to defend themselves."

Thanks to the bureau's investigation, Encore now will refund consumers up to $42 million, stop its collection of $125 million in questionable debts and pay a $10-million penalty.

Portfolio Recovery Associates will refund about $19 million, halt collections on $3 million in dubious obligations and pay an $8-million penalty.

Both companies also are prohibited from collecting any debt they can't verify and from suing anyone without full documentation related to money owed.

"Consumers have the right to expect that they will be told the truth and treated fairly," Cordray said.

Does that sound like an agency run amok? Or does it sound like a much-needed overseer for financial firms that, all too often, demonstrate their unworthiness of public trust?

In the four years since its founding, the Consumer Financial Protection Bureau has, among other actions:

•Forced credit card companies to return nearly $2 billion to consumers who were duped into signing up for costly add-on programs such as unneeded identity theft or disability coverage.

•Required that mortgage lenders verify in advance that a borrower can repay a loan. The subprime mortgage crisis during the Great Recession was precipitated in part by lenders irresponsibly handing out cash to almost anyone who applied.

•Helped secure $480 million in debt forgiveness for students saddled with high-priced loans from Corinthian Colleges Inc. For-profit Corinthian filled for Chapter 11 bankruptcy protection in May and closed dozens of schools.

•Created a database of consumer complaints intended to highlight and resolve ongoing problems. Debt collection, credit reporting and mortgages have drawn the most complaints and, as of last month, the most-complained-about companies were Equifax, Experian and Bank of America.

"The Consumer Financial Protection Bureau is the little agency Wall Street banks and debt collectors love to hate because it works for consumers, not them," said Emily Rusch, executive director of the California Public Interest Research Group.

"For the first time, we have an agency that's looking out for our interests instead of the banks' interests," she said.

A key focus for the bureau these days is payday lending. It has proposed federal rules that would limit the interest rates payday lenders can charge, prohibit borrowers from taking out more than one loan at a time and require lenders to assess borrowers' ability to pay.

The payday-loan industry is lobbying aggressively against federal oversight, particularly the requirement that lenders make sure their customers are creditworthy. This would be too costly, the industry says, and would cut into profits.

Last week, members of the Florida congressional delegation met with Cordray to make the case for why the bureau should use Florida's payday-lending rules as a model for federal oversight.

That state's law has relatively lax standards and no requirement that payday lenders check in advance to make sure borrowers can repay loans.

Floridians who use payday loans take out an average of nine loans a year, according to the Center for Responsible Lending. The average loan is $250 with an annual interest rate of 312%. Most borrowers take out a new loan as soon as the last one is paid off, deepening their cycle of debt, the center found.

Fifteen of Florida's 27 House delegates, Republican and Democrat, received contributions from payday lenders last year, according to the Center for Responsive Politics.

Sam Gilford, a bureau spokesman, declined to comment on what transpired at the off-the-record meeting. But he suggested that Cordray wasn't much impressed with the Florida officials' pitch.

"In general," Gilford said, "making sure that someone has the ability to repay a loan is common sense. In a healthy market, lenders benefit by extending loans that borrowers can afford, not by pushing borrowers into debt traps."

I'm not sure what Republicans mean when they complain about the bureau's "regulatory overreach" or describe it as a "runaway agency."

Any reasonable observer would think these guys seem pretty darn good at their jobs.

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to david.lazarus@latimes.com.

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