The Future of the CFPB and the Debt Relief Industry is in Trump’s Hand

Written by Amy Nickson

After the winning of the current president Mr. Donald Trump, the future of the CFPB is becoming uncertain as the Republicans wanted to disrobe it from the day of its inception.

The Financial Reform Legislation, also known as Frank-Dodd Financial Reform Act, has been signed into law by Barack Obama on 21st July 2010. The Act is a result of the call for changes in the regulatory system.


Enhanced consumer protection by the CFPB

As per the act, the new Consumer Financial Protection Bureau (CFPB) regulates the financial products and services such as credit cards, student loans,  mortgages, etc. Previously, the financial regulators used to focus more on institutions instead of consumers. A director is appointed by the President and the Senate to look after the well-being of the consumers’ right. The CFPB Office have a toll-free hotline number where a consumer can call and register complaints.

The CFPB was the ultimate savior for consumers from last 7 years. At the time of great recession, most of the financial institutions harassed the consumers. Credit card companies haven’t bothered to follow the FDCPA laws.

During this critical time, the Consumer Financial Protection Bureau was able to control financial institutions including debt relief companies from doing unethical activities by enacting some strict laws. The main goal was to enhance the consumer protection and to cut down the unethical activities of financial institutions and debt settlement companies.

Result: Due to the strict laws enacted by the CFPB, both financial institution and debt relief industries had faced high loss and paid billion of dollars in fees.


CFPB sues law firms due to collecting advance fees from consumers seeking debt relief

Here is not the end, till date, the CFPB is working hard to protect the consumers from harassment and loss.

Recently, 3 law firms have been sued by the CFPB in the United States District Court for the Central District of California for the unethical collection of advanced fees from the consumers.

Richard Cordray, the director of CFPB, has said that the 3 law firms had collected illegal fees from the consumers who were in deep financial trouble.

As per the Telemarketing Sales Rule, which was amended in 2010, debt relief companies cannot charge a fee from the consumers before providing the required services to the consumers.

A dispute has been brought to the court by the CFPB that certain law firms (Williamson Law Firm LLC, Howard Law, P.C., Williamson & Howard LLP, and their owners, Lawrence Williamson and Vincent Howard) violated Telemarketing and Consumer Fraud and Abuse Prevention Act, the FTC’s Telemarketing Sales Rule, and the Consumer Financial Protection Act.

The CFPB reported that the above-mentioned debt relief companies had started the manipulative scheme in 2007. Unfortunately, this is not the first time; the CFPB alleged lawsuit on these firms,  also in September 2016. They were accused due to the violation of the court order.

In January 2017, the CFPB ordered two medical debt collection law firms to pay $577,000 with penalty fees due to their overly intrusive collection methods.

So, it is clear that the CFPB is doing its best for consumer protection.


The future of CFPB

Financial institutions and debt relief companies were not happy with the CFPB due to the huge loss. But, the republican party was also not happy with CFPB since its inception. Many conservative Republican expressed their hatred for CFPB. The House Financial Services Committee Chairman Jeb Hensarling was one of the biggest critics of the CFPB. He said, “The CFPB undoubtedly remains the single most powerful and least accountable federal agency in all of Washington.”


Republicans were against the Dodd-Frank and CFPB from its very beginning

Recently, on March 17, the U.S. Department of Justice (DOJ) claimed to D.C. Circuit that the CFPB’s single director structure disobeyed the constitution’s separation of powers in the CFPB v. PHH Corporation case. The issue raises a question mark of the fate of CFPB.

The director of the CFPB was appointed by the president for 5 years, with the advice and consent of the Senate. As per the law, the president can only remove the CFPB director “for cause”. As the CFPB was created by The Democratic-controlled 111th Congress and is the part of the Dodd-Frank Act, the present president may remove its director.

The CFPB is handled by the single director Richard Cordray. Unsurprisingly, the future of CFPB is in dark as the Republicans were not happy with it from the day one. The new president Trump can replace the CFPB director at any time with the support of DOJ.

On Friday, March 17, the DOJ proposed to the entire D.C. Circuit to agree with the three-judge panel’s conclusion and claimed that the CFPB’s structure is unconstitutional. As per the DOJ’s brief “a removal restriction for the Director of the CFPB is an unwarranted limitation on the President’s executive power.”

Possibly, the Trump’s administration will reform a new CFPB shortly with the support of DOJ.

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Amy Nickson

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