States must step up as fate of consumer watchdog CFPB remains in doubt

The future of the Consumer Financial Protection Bureau, the independent agency charged with for enhancing consumer protections and fighting financial harm, remains unclear, as the current administration works toward potentially dismantling the bureau.

A judge has already halted efforts to fire CFPB employees, return funds, and delete data or records pending a preliminary injunction hearing for March 3. Advocacy organizations have expressed concern over the long-term consequences of what this means for the future, especially as the agency’s enforcement activities have returned $19 billion to consumers.

“Consumers depend on the CFPB to be the cop on the beat to protect them from fraudsters,” said John Breyault, vice president of public policy, telecommunication, and fraud, at National Consumers League.

But as consumers wait on the outcome of the bureau’s future, where can they turn when they are victimized?

Advocates say a lot of the work will be up to the consumer and the states in which they reside.

“State attorneys general play a critical role in protecting consumers in their states,” Breyault said.

Each state has a consumer protection office tasked with investigating scams, fraud, and handling complaints against businesses. But, per a January report released by the CFPB, which has worked jointly with states to protect consumers, they recommend that states update their laws and regulations to keep pace with evolving risks.

Despite what’s happening with the CFPB, Breyault encourages consumers to continue filing complaints with the CFPB.

“They are accepting complaints,” he said. But he is unsure who is triaging those complaints and whether there will be any action, and advises against sharing sensitive information such as bank account numbers when filing a complaint.

Yaël Ossowski, deputy director of the Consumer Choice Center, said that in addition to state attorneys general, consumers can pursue legal remedies via state banking commissions, private rights of action, and the Federal Trade Commission.

"Even with a restrained CFPB, consumers can continue to protect themselves from frauds and scams by staying vigilant and using technological tools and verification to avoid sending money or payments to unauthorized recipients,” Ossowski said. “Hackers and fraudsters are very sophisticated, and unfortunately many are criminal actors abroad, but consumer education is the key to stopping the fraud.

The CFPB did not return requests for comment.

Democrats fight back

On Friday, more than 200 House Democrats lawmakers signed on to an amicus brief to block the dismantling of CFPB, arguing that it is “uniquely situated to protect consumers and guard against the predatory practices that led to the 2008 financial crisis” and triggered The Great Recession.

“What we are seeing right now from the Trump Administration is the culmination of a 15-year effort to systematically and illegally gut the consumer bureau and block the agency from doing crucial work to take on the megabanks and predatory lenders that are ripping off hard-working Americans, all in an effort to further enrich themselves off the backs of hard-working families,” said Rep. Maxine Waters (D-CA) in a press release.

According to the Center for Responsible Lending, a poll revealed that CFPB is popular across party lines with 95% of Democrats, 87% of Republicans, and 88% of independents agreeing that it is important to regulate financial services.

Waters, who is a ranking member on the House Committee on Financial Services, is directly asking consumers, former and current CFPB employees to share their stories and concerns about the future of consumer protection without the agency.

She has also issued a letter to the Financial Service Forum and Bank Policy Institute, both of which are advocacy organizations, questioning how their member banks are handling compliance with consumers' financial protection laws.

Waters wrote that consumers should enjoy equal treatment and protection under the law, and that the current administration's actions have created a situation “where community banks and credit unions are being scrutinized for consumer compliance while megabanks are not.”

“That exposes consumers to an untold amount of unchecked harm, so I would encourage your member banks to be transparent about how they are following the law and treating consumers,” wrote Waters.