CFPB

50 YEARS AGO THIS WEEK, JFK USHERED IN MODERN CONSUMER PROTECTION ERA

People of almost any age know a lot about the Kennedy administration with its optimistic beginnings and its sudden, tragic end. Yet many have probably never heard of one of JFK's important legacies -- his declaration that consumers have rights that deserve protection.

Fifty years ago, on March 15, 1962, President Kennedy issued his "Special Message to the Congress on Protecting the Consumer Interest." While his ambitious agenda has not been fully realized, the sweep of his vision bears revisiting.

Kennedy said,

If consumers are offered inferior products, if prices are exorbitant, if drugs are unsafe or worthless, if the consumer is unable to choose on an informed basis, then his dollar is wasted, his health and safety may be threatened, and the national interest suffers.

So, he identified and then called for government action to protect four consumer rights: The right to safety; the right to be informed; the right to choose; and the right to be heard. Other presidents and consumer organizations have added to his work -- proposing rights to consumer education and consumer redress, for example -- but those important additions simply built upon JFK's robust platform.

Kennedy called for enactment of legislation to guarantee the efficacy and safety of prescription drugs and cosmetics because: "Thousands of women have suffered burns and other injuries to the eyes, skin and hair by untested or inadequately tested beauty aids." He called for new food safety rules, which finally passed in 2010.

Above all, Kennedy said, "protection of the public health is not a game."

He called for passage of "truth in lending" legislation to end "serious abuses." He demanded both nutrition and other packaging labeling: "Just as consumers have the right to know what is in their credit contract, so also do they have the right to know what is in the package they buy."

Today, CFPB to possibly end $39 lattes

Would you knowingly agree to pay a $35 fee each time you used your debit card at point of sale, simply to allow you to purchase a $4 latte with only $2 in your account? Even the banks didn't think so, that's why they made “standard overdraft protection” a feature of your checking account that you didn't need to choose. Banks also changed the default switch on debit and ATM cards to allow overdrafts. The combination of these practices, along with the switch from cash to debit card transactions encouraged by rewards programs, made overdraft revenue a major profit center over the last 12 years or so, as the old regulators mostly slept.

At a news conference in NYC today, Director Richard Cordray of the new Consumer Financial Protection Bureau (CFPB) will announce a major investigation of bank overdraft fee practices and propose a model "penalty box" disclosure to appear on bank statements. From Ylan Mui of the Washington Post: "The bureau said it will look into whether banks are reordering customers’ debit-card charges to maximize overdraft fees. Reordering transactions can double or triple penalties, and the practice has been the target of several class-action lawsuits against the nation’s biggest banks. The CFPB’s inquiry also will focus on bank overdraft policies, how they market the plans, and their impact on low-income and young consumers. The agency will solicit feedback from the public."

President’s Recess Appointment Gives Watchdog Teeth It Needs To Protect Consumers From Wall Street Financial Shenanigans

By Edmund Mierzwinski and Alana Miller

Kudos to President Obama for standing up for consumers this week by making a recess appointment of former Ohio Attorney General Richard Cordray to head the new Consumer Financial Protection Bureau. The President’s action means that the CFPB now has all its powers to protect the public from unfair financial practices, whether by banks or other financial firms, such as payday lenders and credit bureaus.

Since July 21, the CFPB – a centerpiece of the 2010 Wall Street Reform and Consumer Protection Act – had been up and running, but only with partial powers. It is the nation’s first federal financial regulator with only one job – protecting consumers, including seniors, students and servicemembers, from unfair financial practices.

Now with a director in place, the CFPB has additional abilities that kick in, including the right to supervise payday lenders, mortgage companies, credit bureaus, debt collectors, private student lenders and other non-banks. It also now has additional powers over banks and credit card companies.

Along with civil rights, labor, senior and consumer groups, PennPIRG had long urged the Senate to confirm Cordray, the former Ohio Attorney General, to direct the CFPB. Recently, 37 state Attorneys General, on a bi-partisan basis, had sent a letter to the Senate urging confirmation.

Yet, at the behest of both the Wall Street banks and the payday lenders, some Senators had opposed confirmation of any CFPB director. 45 Senators, including Pennsylvania’s own Senator Toomey, had written the President in May and told him that they would block confirmation of any director until and unless the CFPB’s independence and authority were first restricted. Then, on December 8th, 45 Senators blocked Cordray’s nomination. They wanted the CFPB weak and powerless and with a tin cup in hand.

If our political leaders REALLY want to help small business…..

It seems like almost every other word we hear from our political leaders is about the need to support small businesses to get the economy back on track. As small business owners, there’s one simple thing that could be done that would provide almost immediate help.

Small business owners have big troubles with big banks and credit cards and the new Consumer Financial Protection Bureau (CFPB) should take a look at the numerous obstacles.

First, banks don't like smaller accounts. Many of us face hassles even receiving business lines of credit. Often, we rely on our personal cards to fund our small businesses.

But when we face fraud problems or billing disputes related to those business uses, the banks say that the consumer protection laws don't always apply. Even consumer groups say it's a gray area. And where we have rights, we have to fight with the banks, which, as you might imagine, does not often lead to a result in our favor.

For those of us who do qualify for business credit cards, the cards have no consumer protections under the law. Banks can raise our interest rate at any time for any reason, or for no reason at all. Banks can lower our credit limit at any time, even to amounts below our current balance. There are no restrictions on penalty fees. When we are victims of fraud or billing errors we have no right under the Truth In Lending Law.

Consumers gained important new protections in the Credit CARD Act of 2009. In response, some credit card companies have been accused of marketing business cards to consumers and then denying those consumers their rights because they have business cards, not consumer cards.

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