Posted on 08/22/2015 12:14:59 PM PDT by Kaslin
The Consumer Financial Protection Bureau (CFPB), a federal agency designed to purposely avoid oversight from Congress, with much fanfare recently introduced a public database cataloging all of the complaints it has received from consumers.
“Consumer complaints are the CFPB’s compass and play a central role in everything we do. They help us identify and prioritize problems for potential action,” CFPB Director Richard Cordray said in a press release announcing the new public database.
The only problem? The database shows complaints about “payday lenders,” which are currently in Cordray's cross hairs, composed less than one percent of all complaints, far outnumbered by mortgage (36 percent), debt collection (17 percent), credit reporting (15 percent) and other categories. Payday lending complaints were one of every 152 complaints the bureau received, 55 times less frequent than mortgage complaints.
Given the weight the CFPB's allies have placed on the complaints – “[Consumers] could be our eyes and ears, and we could focus our resources wherever their complaints led us” is how Sen. Elizabeth Warren described it – one would think that would make it tough for the agency to continue its regulatory blitzkrieg against the lenders.
By way of background, the CFPB recently released draft regulations that would regulate payday lenders almost entirely out of existence, for example by requiring underwriting standards similar to a home mortgage for small-value, short-term loans that are often needed in a pinch.
Alas, the CFPB does not appear to be prepared to listen to the people it says it is trying to help. As soon as the American Banker noticed the “hidden messages” in the data, a CFPB spokeswoman began furiously backpedaling. “Consumer complaints are just one way we learn about the issues consumers face in the financial marketplace,” CFPB spokeswoman Moira Vahey told the financial trade newspaper. Not, you know, the “eyes and ears” of the agency that it will follow wherever it leads them. It turns out consumers are only the CFPB's “compass” when they point in the direction regulators already wanted to go.
Perhaps, as Democratic Rep. Brad Sherman (D-CA) warned, Washington bureaucrats just don't understand that many people in the real world see short-term loans as a crucial lifeline.
“So many of the people making the decisions do not ever need a payday loan and don’t understand that you work out the percentage interest rate and isn’t it terrible that you paid $50 to borrow $400? Well, not if it keeps the lights on in your house. Do you know what the fees are to get reconnected? People in public affairs don’t know. People are in the political world always have the $400 to pay their light bill,” Sherman told Credit Union Times.
“The people who complain the loudest about payday loans are regulators, politicians and advocates that are dead set against them,” Donald Lampe, a partner at Morrison and Foerster, added to the Banker.
Notably, other types of loans, including consumer loans, student loans, and mortgages received many times more complaints than payday loans. Maybe the agency should obey its “eyes and ears” and quit the regulatory jihad against a service that's unpopular in Washington but apparently providing a legal and needed service to its customers — those whom the standard financial industry is restrained from serving by the very same CFPB.
Cordray is Squaw Warren’s boy, isn’t he?
The have created a nightmare with the new disclosure forms lenders have to comply with. Yet if you mess it up, you can be hit with a $1 million fine per violation.
Eliminate the CFPB.
I have a complaint against Elizabeth Warren.
Are you serious?
The CFPB doesn't help consumers, in fact it hurts consumers. The free market will make things right and people taking responsibility for their own decisions.
“So many of the people making the decisions do not ever need a payday loan and don’t understand that you work out the percentage interest rate and isn’t it terrible that you paid $50 to borrow $400? “
No, it would not. I have never used a payday loan, but it appears that they more typically would have a customer pay $400-500 for that $400 loan for using the money for only a month. That’s over 1000% APR. It is ridiculous and should be illegal.
Nonsense. Have you ever been to a pawn shop?
Within reason, if people know what the interest rate is, then it's up to them whether to agree to a contract or not. There is plenty of competition in the payday loan game, so people are free to shop around for an interest rate they can live with.
One of the reasons that interest rates are high on this type of loan is probably because of high default rates.
In any event, are you advocating a situation where such a loan would not be available at all, and be illegal?
I have a great idea: how about letting the consumer decide that, instead of you?
Did you miss the part about how this type of loan doesn't product a lot of consumer complaints? Maybe the reason for is that people know exactly what they're getting into when they acquire such a loan.
At least payday loans don't present the opportunity to commit theft of property via outright fraud, which seems to happen with mortgage lenders on a basis more frequent than many are willing to admit.
That is the type of criminal activity which merits aggressive legal action, rather than pre-emptively banning a loan with an interest rate which you think is "ridiculous".
Baloney. The "free market" often requires massive legal bills to hold shady lenders and debt collectors accountable.
1. A $400 loan with a 500% interest rate.
2. An interest rate of 10% established by law, and nobody willing to lend at that rate.
Pay day loans, pipe shops and small time firearm sellers are relatively easy targets for the totalitarians because they don’t have political clout and don’t get a lot of popular sympathy. But this is a beta test and I’m sure this will metastasize to other small businesses. A “consumer” could tie up a politically incorrect business or business owner with bogus and unfounded complaints. Even if a complaint is seemingly legitimate the punishment for a business is extreme. Not being able to have a business bank account would kill any legal business.
It doesn’t matter if business owners are exonerated; the process is the punishment.
Please stay in New Jersey with your big government ideas.
This guy ought to be thankful. If I didn't have this kind of "big government" avenue to pursue this, the guy would be facing justice without any government intervention at all.
Oh sorry, it’s not $1 million per violation, it’s $1 million per violation per day.
The lower fine has to do if there is a typo in your documents (that’s $5,000 per mistake per day).
Intentional is if you do your forms wrong.
http://www.consumerfinance.gov/regulatory-implementation/tila-respa/
Missteps could draw heavy fines, prompting loud concerns among mortgage industry players and a long-shot effort to delay part of the rule.
The CFPB can impose civil money penalties of $5,000 per day per violation for noncompliance, $25,000 per day for reckless violations and $1 million per day for knowing violations.
Fine, but that is insufficient reason for a free people to submit to an agency whose structure and powers resemble a Soviet style politburo.
I am basing my views on my understanding of the Bible. There may be differences of opinion on how God’s laws can or should be applied in modern days, but be careful before ridiculing something you do not understand because you may end up calling God a liberal.
Here are a few relevant passages:
Exodus 22:25
If you lend money to any of My people who are poor among you, you shall not be like a moneylender to him; you shall not charge him interest.
Deuteronomy 23:19
You shall not charge interest to your brother—interest on money or food or anything that is lent out at interest.
Matthew 25:27
So you ought to have deposited my money with the bankers, and at my coming I would have received back my own with interest.
A healthy economy is not based on debt or the exploitation of people who are weak or vulnerable.
I personally do not believe lending at an interest rate that generates a profit to be immoral, but there is some point at which these lenders are exploiting people.
While this is simply my opinion, I am part of we the people who does have a voice, and the counterarguments are also just opinions. I think short term emergency type loans should have interest rates capped. To me somewhere between 30 and 50% APR including processing fees should be enough for lenders to make high risk loans or it is a business that should not exist.
This is probably something that should be set at the state or community level though. I do not trust the federal government with regulating almost anything.
If a lender commits a fraud the proper way to hold them accountable is a jail cell and a hefty penalty paid to their victims.
“A $400 loan with a 500% interest rate.”
Does this really exist?
I see $400 loans where $900 must be repaid in ONE MONTH.
Even at 500%, $400 would amass only $167 in interest in one month. To me that’s exploitative, but even if you can justify that this might help some people, at what point is it just exploiting desperate people who will agree to ANY rate?
I think the typical payday loans are usually “helping” substance abusers while exacerbating the problem which will lead to more crime. As anecdotal evidence I will refer you to the neighborhoods where payday loans thrive.
This is not a big government vs. small government argument. Remember that these lenders have the full force of law behind them to back their collection efforts. Government is involved regardless of what interest rate caps are in place.
I would not want to regulate a friend willing to loan a friend money at a high rate if they both agree. In other words, it should not be illegal to do this. Yet I also would not want a dispute that arose to necessitate being settled by a tax-funded court system (even if it is civil). It would be a gentleman’s agreement that was non-enforceable.
Would you oppose an enforceable agreement in which I loan someone $400 for all his or her future earning potential? I doubt it. That is slavery. How about 80% of the earning potential for the next 10 years if we both agree? At what point is excessive interest enslaving desperate people?
Just my two cents.
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