After becoming head of the Consumer Financial Protection Bureau — a job for which she had little if any relevant experience — Kathleen Kraninger went on what she called a three-month “listening tour” to learn how best to safeguard the public from greedy banks, credit-card companies and lenders.
This week she revealed what she’d learned.
Consumers don’t need much protection from banks, credit-card companies and lenders, it turns out.
They just need a little schooling.
“Empowering consumers to help themselves, protect their own interests, and choose the financial products and services that best fit their needs is vital to preventing consumer harm and building financial well-being,” Kraninger said in a speech to the Bipartisan Policy Center, a Washington think tank.
“Today’s consumers need these skills more than ever,” she said. “For example, fewer than half of Americans set aside money for their children’s college education. More and more people reach retirement with incomes and savings that simply won’t meet their needs.
“Perhaps most distressing to me was the Federal Reserve report that found 40% of Americans would turn to credit to cover a $400 emergency.”
These are important issues, to be sure, and there’s certainly a role for the nation’s top consumer financial watchdog in increasing people’s financial literacy and money-management skills.
But that’s not, and never was intended to be, the primary mission of the CFPB. Its purpose was to ensure that consumers had a powerful defender when it came to addressing unfair, abusive or illegal practices by financial institutions.
“This is a complete course reversal,” said Carmen Balber, executive director of Consumer Watchdog, a Santa Monica advocacy group. “This agency was created to be a cop on the beat, not a kindergarten teacher.”
Christine Hines, legislative director for the National Assn. of Consumer Advocates, said financial empowerment is a laudable goal.
“But it’s not going to stop abusive debt collectors from unfairly harassing consumers all hours of the day, or stop predatory lenders from charging illegal triple-digit interest rates, or stop banks from tricking customers into buying additional products and services that they don’t need or want.”
Kraninger’s speech this week was the latest nail in the coffin of the CFPB since President Trump took office with a stated goal of being friendlier to business than his predecessor. He had previously installed his main utility player, Mick Mulvaney, currently acting White House chief of staff, to run the agency.
In February, she proposed doing away with an Obama-era rule requiring payday lenders to make sure borrowers can afford the high-interest loans that frequently trap people in endless cycles of debt.
In a recent report, the Consumer Federation of America found that the bureau’s enforcement activity plunged by 80% from 2015, when the CFPB, established in 2011, was at the height of its powers. Average compensation to consumers was down by a staggering 96% per case.
The report concluded that “under the leadership of acting Director Mick Mulvaney and more recently, Director Kathy Kraninger, enforcement activity at the CFPB has declined to levels that are either nonexistent or significantly below that of the prior administration, even in the areas where consumer complaint activity is the highest.”
In her speech to the Bipartisan Policy Center, Kraninger said her listening tour included meetings with “well over 400 consumer groups, state and local government officials, faith leaders, military personnel, academics, nonprofits, financial institutions, former and current members of the bureau’s advisory committees, and consumers.”
You’ll note who came last on that list.
“The ultimate goal for the bureau is not to produce booklets and great content on our website,” Kraninger declared. “The goal is to move the needle on the number of Americans in this country who can cover a financial shock, like a $400 emergency.”
She said she’s “committed to bringing together partners from across sectors to develop and execute a strategy to achieve this outcome.”
Um, OK. Teaching people to be more financially responsible is a good thing.
But so is standing up to financial firms that think they can get away with taking advantage of ordinary people (hi, Wells Fargo!).
Before Trump took office, and before Mulvaney and Kraninger set about making the CFPB a consumer watchdog in name only, the bureau said it had returned about $12 billion to aggrieved consumers. Twelve. Billion. Dollars.
That was money taken from working people in the form of onerous loan terms, undisclosed fees and shady practices. Apparently that’s no longer a major concern for the CFPB.
Au contraire, said a spokeswoman for the bureau, who declined to be named.
“It goes without saying that the director is committed to taking swift action against bad actors,” she told me. “The director could not have been more clear in her speech: ‘Let me state emphatically my view that enforcement is an essential tool Congress gave the bureau — particularly because education, rulemaking and supervision will not prevent every violation.’”
Yet while paying lip service to the importance of regulatory crackdowns, Kraninger said she has called on her staff “to take a fresh look at the entire process,” including “the prioritization and frequency of exams, the size of the exam teams, the days spent onsite” and “the time it takes to complete an exam and deliver a report.”
She also said financial institutions overseen by the bureau need “to self-examine, self-report, and provide restitution where appropriate.”
Self-examine and self-report? There’s another term for this: the honor system.
Ed Mierzwinski, senior director of the federal consumer program for the U.S. Public Interest Research Group, said any mission statement for the CFPB that doesn’t emphasize aggressive law enforcement is nothing more than “a dog whistle to industry to keep marketing profitable, deceptive products.”
Kraninger ended her speech by quoting Benjamin Franklin — “An ounce of prevention is worth a pound of cure.” She said the bureau’s newfound “focus on prevention” will keep consumers safe.
Franklin also said this: “Justice will not be served until those who are unaffected are as outraged as those who are.”
Kraninger is not outraged. Consumers are on their own.