With its fate hanging in the balance, it’s a good time to remember the Consumer Financial Protection Bureau arose out of subprime mortgage scams like these.
A mother who moved her young children out of coveted government-subsidized housing after a loan broker told her she could afford a house. Foreclosure ensued immediately.
A woman wanted to buy a house but she had poor credit. The broker addressed that by adding her unemployed daughter to the application and falsely claiming the pair owned a hair salon. The broker filled out a business license at city hall on their behalf.
A young couple from Colombia were thrilled to be able to buy a home. They were unaware the broker had inflated the husband’s monthly income at a rental car agency from $2,200 to $6,500 a month. It didn’t take long to miss a mortgage payment.
As a Boston Globe reporter, these and other stories I covered two decades ago put a human face on financial tragedy. The unprecedented subprime mortgage fraud resulted in record numbers of foreclosures, starting in 2007, that dragged on for years, ruining lives.
But the Consumer Financial Protection Bureau that was created to prevent abuses like these is currently in legal limbo. The Trump administration targeted the agency for cuts, and a case brought by employees challenging the cuts is currently in court. A judge on Monday kept a prior order in place to halt staff changes until a March 10 hearing, though employees said some offices that closed have not been reopened as the administration maintained.
Since the Great Depression, the financial industry has operated under several different regulatory agencies. Their job is to ensure companies have enough capital, and preventing bank failures is a form of consumer protection.
The CFPB is different. Rather than police multibillion-dollar institutions’ soundness, it works from the ground up. The watchdog ensures the safety of the credit cards, mortgages, student loans, and bank accounts that each of us requires to conduct our daily business. The agency said it uploads more than 10,000 complaints from consumers a day to its complaint database.
CFPB enforcement actions since 2012 have returned nearly $20 billion to consumers victimized by fraud and sloppy financial practices. The agency “has been a formidable advocate for everyday Americans,” said the Center for American Progress.
Last year, for example, the agency required credit card companies to drastically reduce those exorbitant late fees, and it is investigating a recent rise in mortgage closing costs. CFPB reports it has returned $23 million to active service members, veterans and their families falsely threatened with debt collection. It has initiated cases on behalf of consumers against financial apps, student loan companies, major investment banks, obscure commercial banks, credit agencies, and, yes, mortgage companies. The list of actions is long.
Government working for the people. That’s what the CFPB is all about.
Squared Away writer Kim Blanton invites you to follow us @SquaredAwayBC on X. To stay current on our blog, join our free email list. You’ll receive an email each week – with a link to the week’s article – when you sign up here. This blog is supported by the Center for Retirement Research at Boston College.
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