Right this minute, even as you read these words, an agency of the federal government is doing something good -- several things, actually.
We hear so often from the folks on the right that government is the problem and that excessive regulation is the root of all our economic ills that this may be shocking news. Indeed, on the day I'm writing this, a Google News search for the phrase "job-killing regulations" turned up 1,550 hits. The message that government rules stifle economic activity and generally cause misery and ruin is so pervasive that it's easy to forget that intelligent regulation can protect the economic well-being of ordinary Americans, preserving jobs and helping the whole economy.
Enter the Consumer Financial Protection Bureau. CFPB, created by the Dodd-Frank financial reform law, has only occasionally been in the news -- most often when anti-regulation forces in Congress have tried to stop it from doing its job and the Obama administration has tried to get around those roadblocks.
But, largely under the radar of national media focused on either the sensational or on political coverage that obsesses over horse-race stories, CFPB has been quietly doing what Congress set it up to do: study the ways in which consumers can get mistreated by our financial system and develop clear, effective methods of enforcing the laws intended to protect people from being scammed and fleeced. Contrary to claims that it would be some sort of unrestrained regulatory monster, CFPB Director Richard Cordray has steered the bureau on a steady, thorough, methodical course.
For example, right now CFPB is looking at prepaid cards, whose use has exploded from $12 billion in 2007 to over $57 billion last year -- a nearly 500 percent increase. These are cards that look a lot like bank debit cards, and act a lot like them when used to make a purchase. But, unlike debit cards attached to your bank account, these prepaid cards are not subject to the same government rules that protect users of debit cards.
That's important. It means, for example, that fees you pay to use these cards may not be fully disclosed. So CFPB is looking at creating consumer-protection rules for prepaid cards.
But the bureau is not rushing the job. Instead of writing rules and then putting them out for 60 days of public comment, CFPB -- in a practice it seems to be following regularly -- is asking for public input before it writes any rules. It's asking consumers to let it know, for example, how it can best help consumers compare these cards with other products that may have different fee schedules or be distributed through different channels. It wants to know what the public thinks of cards that claim to help consumers build credit, how well they work, and how they should be regulated.
Once the public's input is reviewed, CFPB will draft a set of rules and then open those rules up for another round of public comments.
What's encouraging about this -- and what flies in the face of the claims of anti-regulation zealots -- is that this sort of careful, thoughtful approach is becoming CFPB's trademark. For example, having recently received new research data, CFPB is asking for further comment on potential rules intended to make sure that borrowers are not, in Cordray's words, "set up to fail with mortgages they cannot afford." Way too much of that happened during the housing bubble, plunging millions into foreclosure and shaking our whole economy.
In a fascinating and encouraging experiment in consumer transparency, the bureau has created an online database of consumer complaints regarding credit cards, that went live on June 19. CFPB has created an easy online interface for submitting a complaint about a financial institution and also established an ombudsman's office to help anyone who feels they are having trouble with the bureau.
Not everything is perfect -- at present, for example, there's no sign of a search function on CFPB's website, which is frustrating -- but overall, this is an example of a federal agency doing just what we want government to do: protect the public from dangers that most of us can't reasonably protect ourselves from. And it's doing it in a steady, careful, thorough manner.
Consumer advocates, including us at The Greenlining Institute, argued forcefully for CFPB's creation in the financial reform law, in order to prevent a rerun of the sorts of fraud and abuse that shipwrecked our economy and destroyed the dreams of millions. Thus far, it looks like we were right.