Who's Killing the CFPB? We Are.

The Honorable Richard Shelby, Mitch McConnell and—to quote Spiro Agnew, “those nattering nabobs of negativism” (by which I mean the 43 Senators who always say “never”)—sure had their turkey shoot last week. The innocent bystander was Richard Cordray, the President’s nominee for Director of the Consumer Financial Protection Bureau. The targets were Barack Obama and the CFPB itself. However, when dinner is served, consumers throughout the land will come to realize that they are the plat du jour, and ultimately only have themselves to blame.

It has been said that the members of the minority party in the Senate (whose favorable ratings compare with a hat size) wouldn’t confirm Ronald Reagan as Director of the CFPB unless and until its structure and funding mechanisms are amended—which means that it will remain in a state of regulatory limbo until after the 2012 elections. You see, Congress’ approval ratings may be in the toilet (it’s between 11 and 13 percent depending on which poll you believe), but that doesn’t seem to bother most of us. According to OpenSecrets.org, re-election rates for both the Senate and the House of Representatives were 84% in 2010. But there is a glimmer of hope. A just released Pew survey indicates that a record number of voters intend to vote incumbents out of office.

The study notes, “Public discontent with Congress has reached record levels, and the implications for incumbents in next year’s elections could be stark. Two-in-three voters say most members of Congress should be voted out of office in 2012—the highest on record. And the number who say their own member should be replaced matches the all-time high recorded in 2010, when fully 58 members of Congress lost reelection bids—the most in any election since 1948.”

But talk is cheap and incumbent re-election rates have been near or over 80 percent for more than thirty years. Plus, the study notes that while the number of voters who want their representatives replaced is at 33 percent, 50 percent of voters want their representatives to remain in office. So it’s entirely possible that despite our collective dissatisfaction, most of us will give them a free pass come election time.

Unfortunately, just as time waits for no man, many of the abuses that the CFPB was created to address continue unabated, and in fact, by all indications, seem to be accelerating. So, as we approach November 6, 2012, there are a few things you should ponder before reflexively casting a ballot for the guy whose name seems most familiar. First, let’s look at the numbers.

There are two kinds of statistics: the kind you look up, and the kind you make up. Let’s deal with the first kind, and let’s stick to only one broad area of Bureau responsibility that is today largely unregulated—debt collection abuse and debt collection fraud. Because of the persistently vegetative state of the economy, the debt collection industry is booming. In 2010, approximately $150 billion worth of problematic debt was bought from its originators. In the same year the Federal Trade Commission received 140,036 consumer complaints about attempts made to collect that debt, up 17% from 2009. There was only one consumer fraud category for which more complaints were registered with the FTC—and that was, of course, identity theft. The FTC does not keep count of complaints made to state consumer protection agencies, police departments, or law firms—so the number of actual consumer complaints about debt collection practices was likely geometrically larger.

The FTC regulates many things, including things like large-scale mergers between multinational oil companies, and Verizon’s proposed $3.6 billion deal with the cable companies. It seems unlikely that your complaint about getting that 3 a.m. phone call will get much attention, doesn’t it? Worse, the agency is statutorily unable to do much. It enforces the Fair Debt Collection Practices Act, a 1978 statute that is good as far as it goes, but since it was written before things like cell phones and computers, it leaves a lot to be desired. Moreover, the FTC has no authority to issue rules or regulations pursuant to the act, which is one of the principal reasons that the CFPB was created in the first place.

Who’s Killing the CFPB? We Are. (cont.) »

Image: nshepard, via Flickr.com