Home > Uncategorized > Will a Trump Presidency Lead to More Predatory Lending?

Comments 1 Comment

Free markets mean corporations and consumers are engaged in a constant arm-wrestling match over prices and rules governing marketplaces. When President-elect Donald Trump takes office, will the rules of this engagement change substantially?

Already, Republicans are fighting hard to dismantle, or at least disempower, the nation’s newest federal consumer protection agency, the Consumer Financial Protection Bureau (CFPB). But that’s just one of several steps being weighed that could dramatically impact the balance of power between consumers and corporations during the next several years. Trump and his appointees will soon be dealing with everything from net neutrality to robocalls to late fees. Like so much with Trump, it’s hard to know if he stands with traditional Republican positions on these issues, or if he has his own ideas. But clearly, the future of issues ranging from payday-loan regulation and binding arbitration rules to debit card swipe fees are at stake.

Consumer Protections On the Line

The power of federal consumer protection agencies like the Federal Trade Commission (FTC), which fields things like consumer identity theft complaints, tends to ebb and flow based on which political party holds power in Washington, and on the state of the American economy. The economic collapse last decade, combined with the rise of Democratic power in Washington, led to a host of steps taken to rein in what supporters say were abusive practices that hurt consumers, particularly by the financial industry. Financial reform saw passage of the CARD Act, which banned several credit card issuer practices that consumers found frustrating, such as double-cycle billing or seemingly random late fees and interest-rate hikes.

More importantly, the Obama years also saw creation of the first new federal consumer protection office in decades. As Trump takes office on Friday, a battle royale has already developed between consumer groups and conservatives who want to gut America’s youngest consumer-oriented agency. The war of words escalated last week, with opponents of the bureau calling for Trump to immediately remove bureau chief Richard Cordray, calling him “King Richard,” while supporters have promised they have “gone to Defcon One” to protect it.

The CFPB is the brainchild of Elizabeth Warren — then a bankruptcy expert, now a Democratic Senator from Massachusetts. The bureau was designed to pick up where other banking regulatory agencies, like the Office of the Comptroller of the Currency (OCC), left off. Bank regulators like the OCC have the difficult job of serving two masters — both the safety and soundness of the banking industry and the fairness with which consumers are treated. Critics said the abuses apparent during the housing bubble, such as unclear mortgage documents, demonstrated that regulators sided too often with banks and neglected consumer protection. So the CFPB was designed as a consumer-first agency. It was also designed to enjoy independence from industry pressure — it is not subject to Congressional purse string requirements, and its director not subject to removal for political reasons. At least, that was the intention of Warren and Democrats who wrote the legislation creating the CFPB.

A lawsuit that went in the favor of CFPB opponents last fall has, at least for now, paved the way for removal of CFPB director Cordray. The bureau and its supporters plan to appeal the ruling, but Republicans aren’t waiting around for that. They are urging Trump to remove Cordray as soon as he takes office.

“It’s time to fire King Richard,” Senate Banking Committee member Ben Sasse, R-Nebraska, wrote in a January 9 letter to Trump. “Underneath the CFPB’s Orwellian acronym is an attack on the American idea that the people who write our laws are accountable to the American people. President-elect Trump has the authority to remove Mr. Cordray and that’s exactly what the American people deserve.”

Bureau opponents say the CFPB should operate more like the FTC, with a slate of politically-appointed commissioners running things.

Last week, the Trump administration signaled it was leaning toward removing Cordray and reining in CFPB power by revealing it had interviewed retired Texas Republican Congressman Randy Neugebauer as a potential CFPB chief. In Congress, Neugebauer was a leading CFPB critic, calling its efforts to regulate payday loans “paternalistic erosion of consumer product choices.”

Meanwhile, Rep. Jeb Hensarling, R-Texas, indicated he will move immediately to pass legislation he proposed last term named the Financial Choice Act, which is largely designed to roll back provisions of the Dodd-Frank Financial reform bill. It would eliminate the Volcker Rule, designed to prevent banks from taking some kinds of risks with their own money; it would also remove the Durbin Amendment that limited fees on debit card transactions.

“We were told [Dodd Frank] would lift our economy, but instead we are stuck in the slowest, weakest, most tepid recovery in the history of the Republic,” Hensarling said while supporting the bill last fall.

Bureau supporters are fighting back. Warren held a conference call on January 13 with 3,000 consumer advocates where she rang the alarm about the future of the CFPB and financial reform.

“It’s time to send a message to big banks, payday loan lobbyists and their Republican friends in Congress: The American people are watching,” Warren said, according to a press release from Americans for Financial Reform, an advocacy group. ”We’re going to fight back against any efforts to gut financial reform and to allow big banks and shady financial institutions to once again cheat consumers and put our economy at risk.”

Consumer advocacy groups universally support the CFPB, which says it has returned $12 billion to 27 million wronged consumers since its inception. One group held a “One of 17 Million” event in Washington, D.C. earlier this month.

“We’ve gone to DefCon One on protecting the CFPB because the predatory lending industry and the big Wall Street banks are all demanding the President-elect illegally fire the extraordinary CFPB director Richard Cordray and replace him with one of several industry henchmen who will help Congress eviscerate the successful bureau,” Ed Mierzwinski, program director at the Public Interest Research Group, an advocacy organization, said. “But how do you fire an effective official who has protected consumers and families from financial predators exactly as Congress asked him to do? You ignore the law and you ignore the voters’ demand for an unrigged financial system. We hope Mr. Trump has better judgment than that.”

Some Consumer-Friendly Officials Departing D.C.

Already, some noted consumer-friendly officials have started to leave Washington.

At the FTC, Chairwoman Edith Ramirez announced she would resign on Friday. Ramirez focused on emerging internet of things technologies during her six years at the FTC.

“Ramirez cast a spotlight on emerging privacy issues, involving ‘smart TV’s,’ cross-device tracking and other technologies,” the Center for Democracy and Technology said, praising Ramirez’s time at the agency. “Through a series of cutting-edge cases — Snapchat, D-Link, inMobi and Turn, for example — the commission made it clear that tech companies that deceived consumers or failed to protect their security would be punished and publicly shamed.”

In addition to consumer issues like privacy, the FTC’s main charge is to enforce antitrust law. During his candidacy, Trump signaled a break with traditional Republicans over anti-trust law, suggesting, for example, that he would have blocked the Time Warner-AT&T merger. But Trump picked former FTC commissioner Joshua D. Wright to run his FTC transition team. Wright, a traditional conservative who, in an op-ed penned days after Trump’s election victory, criticized “anti-merger mania.” He said evidence shows big mergers often help consumers, and cautioned against a return to the days of trust-busting.

Wright is widely believed to be the leading candidate to head the commission after Trump takes office.

The Trump transition team did not immediately respond to Credit.com’s request for comment.

So Long Net Neutrality?

Even bigger changes might be coming to the Federal Communications Commission (FCC), however Multichannel.com reported this weekend that Trump’s picks to head that agency — several veterans of the conservative American Enterprise Institute — have plans to eliminate the FCC’s consumer protection tasks altogether. Currently, the FCC helps consumers in dispute with telecommunications providers and sets policies, like net neutrality.

FCC Chairman Tom Wheeler, who led the charge for net neutrality and new privacy rules for broadband consumers, will vacate his spot on Inauguration Day. While Trump picked FCC transition team members with anti-net neutrality track records — one a Verizon economist, the other a former Sprint lobbyist — Wheeler said in a speech last week that overturning the commission’s rule is not a foregone conclusion. Changes would require a new rule making process, he said — and that would be a mistake.

“Tampering with the rules means taking away protections that consumers in the online world enjoy today,” Wheeler said in his speech.

While Trump transition team members Ajit Pai and Michael O’Rielly advocated for a streamlined FCC before, backtracking on issues like net neutrality seems less a sure thing after Trump added Republic Wireless co-founder David Morken to that transition team. As head of a small telecom company, Morken has said he is against changes that help entrenched competitors, and has a populist bent to his rhetoric.

“Traditional Republican telecom policy has favored incumbents who are heavily engaged in regulatory capture over innovators like us,” Morken told The Wall Street Journal in December.

His lack of opposition to net neutrality, in addition to that open challenge of established Republican thinking, has led some to think he might provide balance on a Trump FCC. But as with the many critical consumer issues the Trump administration will take on in the coming months, only time will tell whether populist positions or conservative leadership will win that arm-wrestling match — and how consumers will fare in their own wrestling match with corporations.

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

Image: andykatz

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Larry1566

    So credit.com is turning political

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team