The White House Office of Management and Budget recently declared its support for legislation called the Economic Growth, Regulatory Relief and Consumer Protection Act. The bill has been passed by the Senate and is expected to be approved by the House in coming weeks.
“The administration is committed to consumer protection and ensuring that consumers have the tools needed to manage their finances in the manner that best suits their own personal needs and financial goals,” the OMB said.
Good news, right?
The OMB is run by Mick Mulvaney, who also serves as President Trump’s interim director of the Consumer Financial Protection Bureau. In that capacity, he has shown himself to be committed to rolling back consumer protections and favoring business interests — with the president’s blessing.
This new bill, while touted as enhancing consumer rights, in reality would leave many people with fewer safeguards.
“This is a bad bill, straight across the board,” Mike Litt, consumer campaign director for the U.S. Public Interest Research Group, told me.
At first glance, the legislation appears to give consumers a major perk: It would allow people to freeze their credit files for free — a highly effective way of keeping fraudsters and identity thieves at bay by requiring a PIN to access credit info.
Right now, the big credit agencies — Experian, Equifax and TransUnion — charge about $10 each time someone wants to lock or unlock their credit files. That can be a costly burden in an era of near-daily security breaches.
“This provision will empower consumers to protect their credit in the event of future data breaches or incidents of identity theft,” the OMB said in its endorsement of the bill.
But the legislation has a hidden trap — and there’s no way an ordinary person would even know it’s there.
The nearly 200-page bill says, innocuously, that it amends “Section 625(b)(1) of the Fair Credit Reporting Act (15 U.S.C. 1681t(b)(1))” by adding ‘‘(J) subsections (i) and (j) of section 605A relating to security freezes.”
What does that mean? Obviously the drafters of the bill don’t want you to know, otherwise they’d have said it in plain English.
What’s happening, though, is that the right to free credit freezes is being linked to a provision of the existing Fair Credit Reporting Act that prevents states from adopting tougher measures. In other words, the new bill would pre-empt state laws.
That’s a thing. California’s credit-freeze law, for example, says no one can access your credit file if a freeze is in place, including a potential employer performing a background check or an insurance company.
The new federal bill, however, stipulates that even if you freeze your credit file, its contents still could be accessed by “any person using the information for employment, tenant or background screening purposes” and “any person using the information in connection with the underwriting of insurance.”
That obviously means more business for the credit agencies, freeze or no freeze.
“At the end of the day, this is a bill that benefits the big three credit agencies,” Litt said.
Don’t forget, Equifax was at the center of a massive security breach last September, exposing the confidential information of 148 million people to hackers.
Here’s another sneaky element of the bill: It would require credit agencies to provide free credit monitoring to service members, which is a good thing.
But it goes on to say that “Sections 616 and 617 shall not apply to any violation of this subsection” and “this subsection shall be enforced exclusively under section 621 by the Federal agencies and Federal and State officials identified in that section.”
This means if a credit agency failed to provide a service member with a timely fraud notice, and if that service member’s credit score was harmed as a result, he or she wouldn’t be allowed to sue.
Does anyone think the authors of this legislation didn’t go out of their way to hide that particular nugget?
Francis Creighton, chief executive of the Consumer Data Industry Assn., an industry group, said credit agencies support the bill. But he said the companies didn’t seek favorable treatment from lawmakers.
Creighton also said free credit freezes and monitoring represent “a pretty good deal for people.” If service members want a right to sue, he added, they can pay for credit monitoring like other customers.
Message: There’s no free lunch, kids. We give you something. You give something back.
It’s worth noting that this legislation is concerned primarily with banking issues rather than consumer affairs. As such, it’s significant that it has bipartisan support, which is something of an endangered species in Washington these days, and it was produced through a relatively open process.
Compare that with the 500-page Republican tax bill, which was fiddled with by lobbyists right up to the last minute and was passed by the Senate at 2 a.m. without a single public hearing.
The new bill is the first meaningful tweaking of the landmark Dodd–Frank Wall Street Reform and Consumer Protection Act, which was signed into law in 2010 after financial firms created havoc in the mortgage market and ushered in the worst economic crisis since the Great Depression.
Dodd-Frank runs 2,300 pages, and no legislation of such scope gets everything right the first time (see: Obamacare). Critics say Dodd-Frank, which was aimed primarily at big banks, created an unfairly rigid regulatory burden on smaller institutions.
The new bill would remedy this by raising the financial threshold for Dodd-Frank’s rules to apply.
The legislation doesn’t roll back Dodd-Frank’s consumer protections per se — it wouldn’t kill off the CFPB, although many Republicans favor such a move.
But it notably ignores the recent scandals involving Wells Fargo, which has been fined more than $1 billion for opening accounts without customers’ permission and forcing people to buy insurance they didn’t need.
Lawmakers had a chance to heighten transparency and accountability in consumer financial transactions, and instead chose to maintain the status quo. A missed opportunity.
Mulvaney’s OMB says “the net impact of this legislation will be to foster economic growth by expanding prudent lending, reducing regulatory costs and strengthening consumers’ ability to protect their credit records.”
It concludes that “if S.2155 were presented to the president in its current form, his advisors would recommend he sign the bill into law.”
Considering Trump’s stance on consumer protection, as seen in his evisceration of the CFPB, that’s probably all you need to know.