This month, two different but powerful Wall Street bank lobbies launched self-serving attacks on the Consumer Financial Protections Bureau's most recent efforts to make banking markets more transparent. What do the banks have to hide?
The Financial Services Roundtable, comprised of some of the nation's biggest banks, has launched a Twitter and social media campaign attacking proposed improvements to the CFPB's two-year-old Public Consumer Complaint Database.
Meanwhile, the Consumer Bankers Association has challenged a separate CFPB proposal to expand the transparency of bank contracts to provide debit card and other financial services on campus.
First, why the attack on the existing database now? The database has been up and running for two years; data points on some 400,000 complaints about banks, credit cards, debt collectors and other firms are available for download and analysis by researchers, other consumers and firms. Even bank lobbyists have admitted that the existence of the database is improving their response to consumer complaints.
But now the CFPB has proposed to enrich the database by adding consumer stories to the fields available for review. The FSR wants to stop this transparency proposal, which is out for public comment until September 22.
We've issued five recent reports analyzing different categories of complaints in the already-useful database in a variety of ways. In each report, we've also urged the disclosure of consumer stories as a way to make the database even better. Others share our view. Including information about how many times the consumer called the bank, over what period of time and how much money was involved will better enable other consumers to make better marketplace choices or to say "Hey, that exact problem happened to me, too!"
For example, they claim firms won't be able to tell their side of the story, which the CFPB proposal makes clear is simply false. I also point out that many other government agencies, included NHTSA's Safercar.gov and the CPSC's SaferProducts.gov, also already have effective public complaint databases.
What do FSR and its members have to hide?
Second, why the attack on campus card transparency? In December, CFPB asked banks to voluntarily publicly disclose their contracts involving campus banking relationships. Following a recent CFPB blog update on the project, the Consumer Bankers Association, another Wall Street lobby that represents many of the banks operating on campus, didn't say "good idea." Instead, they sent a letter to Director Cordray attacking the proposal.
What have CBA members got to hide?
The CFPB's proposal makes a great deal of sense. Banks partner with schools to disburse student loan refunds, often through debit cards. They also have a variety of other undisclosed campus partnerships, including for dual purpose debit card/student IDs.
And as the CFPB points out, why not voluntarily disclose information on campus debit card partnerships since similar information is already available on credit card agreements?
After secretive bank partnerships to market credit cards on campus were exposed, Congress included language in the 2009 Credit CARD Act requiring (first the Fed and now) the CFPB to issue an annual report on campus credit card agreements and to maintain a searchable public database of campus credit card contracts.
Improper relationships between student loan companies and universities also led to recent reforms. State attorneys general investigated cases involving kickbacks ranging from direct payments to the school to Caribbean cruises for school officials by student lenders. Those scandals resulted in the Student Loan Sunshine Act being incorporated into major 2008 education legislation. It prohibits various unfair practices. It also requires schools to be transparent about how they select and list private lenders to supplement federal loan offerings (example).
But colleges have many more relationships with banks than student loan and credit card agreements. Campus banking is big business. So big that the Senate Banking Committee held a hearing last month called "Financial Products for Students: Issues and Challenges." Campus banking isn't perfect, as my colleague Christine Lindstrom testified at the hearing:
Since 2007, we've worked to ensure that students are protected from the tricks and traps layered into high-cost products like campus credit cards (PIRG's 2012 report, The Campus Debit Card Trap), private student loans, and campus bank accounts and debit cards. Right now, students are being hit with high fees that are hard to avoid as they try to access their federal aid refunds through campus-sponsored bank accounts and pre-paid debit cards. The lowest income students, who receive the most in financial aid, are the prime targets for these products and are the hardest hit.
This campus card sector has been under investigation. One of the largest marketers of the loan disbursement programs, the financial firm Higher One, has faced enforcement action and multi-million dollar civil penalties by the FDIC over its campus debit card overdraft fee practices. The Department of Education is developing new rules for campus cards used for student loan disbursement. A GAO study has a telling title: "College Debit Cards: Actions Needed to Address ATM Access, Student Choice, and Transparency." The Department of Education's Inspector General had similar findings in its report.
But when the CFPB came forward with a reasonable request for transparency in the campus card marketplace, why did a powerful association that represents many banks with campus relationships (its president, Richard Hunt, was also a Senate witness) call foul?
What do Mr. Hunt and his CBA members have to hide? What does FSR have to hide?
Both the CBA and FSR ploys come down to this: The banks don't like the very idea of the CFPB. They don't like the idea of a regulator tasked with just one job, protecting consumers.
No, Wall Street doesn't like reform. But the public continues to overwhelmingly support the CFPB and wants even "tougher" oversight of Wall Street, as this recent poll commissioned by Americans for Financial Reform (July 2014) shows.
Senator Elizabeth Warren (MA), the architect of the CFPB, explained the development of the public database in her recent book, A Fighting Chance:
"We figured that by telling the world how many complaints we'd received about each of the big banks and how those complaints were resolved, we might make the market for credit work better (page 183)."
Please take a moment to make the market for credit work better. Comment in support of the CFPB's important proposal to add consumer stories (narratives) to the information already in the database. You can comment here until 9/22.
The idea of the CFPB needs no defense, only more defenders. We've compiled a list of ten of the ways (we've got more) that CFPB helps consumers.
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