The last year was a remarkable one for consumer protection.
Among the wins: A new watchdog agency opened for business, regulators cracked down on a controversial merger and a major bank retreated from a dubious fee.
But there’s still plenty of heavy lifting to be done as the economy trudges back to higher ground. Consumers and corporations will continue to tussle for the upper hand amid a shifting regulatory and political landscape.
“There are definitely a number of hurdles for us to get over,” said Sally Greenberg, executive director of the National Consumers League in Washington. “We have a tough year ahead.”
New sheriff in town
The biggest consumer news of 2011 was the July arrival of the Consumer Financial Protection Bureau. That’s the agency President Obama created to keep a closer watch on credit card issuers, mortgage lenders, payday loan companies and other businesses with a direct effect on people’s financial lives.
Because banks and other firms fought against the agency every step of the way, the mere fact that it’s up and running is a major accomplishment. But Republican lawmakers are blocking appointment of a director until they can water down the agency’s leadership structure and have more say over its finances.
The first few months of the Consumer Financial Protection Bureau’s existence were focused on getting the word out about its operations and encouraging consumers to report problems. As of Oct. 21, the agency said, it had received more than 5,000 complaints about credit cards.
Although the bureau has yet to issue an enforcement action or regulatory mandate, officials say they’re off to a good start.
“We’ve already launched efforts to bring greater transparency to the mortgage and student loan markets,” said Raj Date, special advisor to the Treasury secretary for the agency.
“Going forward, we’ll continue to hold ourselves to a high bar,” Date said. “We’ll be tough but fair. We’ll help fix the broken markets that exist today. And we’ll help make sure that past mistakes are not repeated.”
Coming months will see the bureau focusing on enforcement of financial reform legislation requiring lenders to assess upfront whether a potential borrower has the ability to repay a loan, and on making sure mortgage bills are easier to understand.
Debit card debacle
And speaking of banks, consumers notched a rare win when Bank of America dropped plans for a $5 monthly debit card fee.
BofA threw in the towel after consumers and lawmakers said it was unreasonable to hit people with a charge just to access their money, and after other banks withdrew their own plans for similar fees.
If nothing else, BofA’s retreat shows that the relationship between banks and their customers isn’t a one-way street, and that financial institutions are capable of recognizing when they’ve pushed their luck.
Until the next fee comes along, that is.
Meanwhile, I’ll claim credit for a modest victory after getting health insurer Anthem Blue Cross to drop its plan to charge a $15 “convenience fee” for credit card payments. After I discovered that such a fee could violate state law, Anthem said it would waive the charge for the foreseeable future.
So what can we anticipate for 2012? Clearly financial institutions should expect greater scrutiny of their business practices by consumers, lawmakers and regulators.
No one begrudges banks a fair profit for their services. But there will be greater pressure for them to justify levies that appear to serve no purpose but to bolster shareholder returns.
It’s also likely that regulators will apply the brakes to megabillion-dollar mergers that make the big a whole lot bigger but place consumers at a distinct disadvantage.
Push-back over merger
That became clear when the Justice Department filed a lawsuit to stop AT&T’s $39-billion merger with rival T-Mobile on antitrust grounds, followed by the Federal Communications Commission challenging AT&T’s assertions that the deal would result in lower prices, better service and jobs aplenty.
In a move that would have been unthinkable under the merger-friendly Bush administration, the FCC not only questioned the legitimacy of AT&T’s claims but released a staff report all but calling AT&T’s pie-in-the-sky assertions outright lies.
AT&T responded with a statement saying the report was “so obviously one-sided that any fair-minded person reading it is left with the clear impression that it is an advocacy piece, and not a considered analysis.”
Just the opposite is true. This was an example of regulators doing the job they were appointed to do: Safeguarding the public from self-interested businesses that place market control ahead of providing customers with the best possible product at the best possible price.
There’s nothing inherently wrong with mergers. But companies shouldn’t stretch the truth in justifying such moves. AT&T erred in selling its marriage to T-Mobile as a boon to consumers and the country. It wasn’t.
And now it looks like it never will be. As the year drew to a close, AT&T said it was dropping its takeover plans for T-Mobile.
Score that a solid win for consumers. But such victories may be few and far between.
Advocate in chief
My biggest hope for the new year is that Obama will resume his role as consumer advocate in chief. He led the way on healthcare reform. He pushed for financial reform. He didn’t flinch as the money club pounded away at early plans for the Consumer Financial Protection Bureau.
But then he started blinking. Obama scaled back the ambitiousness of his healthcare reform plans, removing a “public option” from the equation. He eased up on key financial reforms, such as new oversight for the largely unregulated derivatives market.
And most prominently, he threw Elizabeth Warren under a bus. She’s the Harvard professor who came up with the idea of a Consumer Financial Protection Bureau in the first place. She’s the one who did all the initial work to make such an agency a reality.
Yet when conservatives fretted that Warren might be too darn tough on banks and other businesses, Obama cast her aside and instead nominated former Ohio Atty. Gen. Richard Cordray to run the show.
It was a wasted gesture, because Republican lawmakers say they’ll block Cordray’s and anyone else’s nomination until Obama agrees to weaken the bureau’s leadership by replacing its director with a more easily influenced five-person commission, and to give Congress more control over the agency’s purse strings.
GOP senators held firm when a vote on Cordray’s nomination was taken a few weeks ago, leaving the watchdog agency without a chief and preventing it from fully meeting its statutory responsibilities.
What should Obama do now? He should stand up to such flagrant bullying and maintain the integrity of the agency. And if the GOP won’t yield, Obama should attempt to install Cordray in a recess appointment.
I’ve said it before and I’ll say it again: If businesses do nothing wrong, they have nothing to fear from a regulatory body charged solely with ensuring fair treatment of consumers.
That was true last year. It’s no less true now.
David Lazarus’ column runs Tuesdays and Fridays, and occasionally in between. He also can be seen daily on KTLA-TV Channel 5. Send your tips or feedback to email@example.com.