Archive for the ‘Financial Reform’ Category

Last week, the Consumer Financial Protection Bureau (CFPB) fined Wells Fargo $185 million for the astounding abuse of opening more than two million unauthorized deposit and credit card accounts.

Now, Senate Majority Leader Mitch McConnell (R-Ky.) is employing a rarely used procedure to force a rushed vote on a bill to defang the CFPB.

Ok, now here’s a quiz. Can you guess which member of Congress with his wife holds more Wells Fargo stock than any other, at least according to the most recently available financial disclosure forms?

You guessed right! Mitch McConnell.

Let’s walk this through in more detail.

On Friday, the CFPB announced $185 million in fines and penalties against Wells Fargo for the jaw-dropping, illegal practice of opening deposit and credit card accounts for consumers who did not request them and did not know they existed. Not just a few such accounts — 2 million of them. According to Wells Fargo, more than 5,000 employees were involved in setting up the sham accounts.

One hundred million of that total penalty was imposed by the CFPB; $35 million goes to the Office of the Comptroller of the Currency, and $50 million to Los Angeles. The $100 million fine is the largest ever imposed by the CFPB.

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Enter Mitch McConnell.

This week, he announced plans to rush to the Senate floor S. 3318, “A bill to amend the Consumer Financial Protection Act of 2010 to subject the Bureau of Consumer Financial Protection to the regular appropriations process, and for other purposes,” introduced by Georgia Republican Senator David Perdue.

You might be curious to read the bill.

Too bad.

It was just introduced on Monday, and the text does not yet appear oncongress.gov, the website where proposed bills are posted.

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But the title tells you what you need to know. When the CFPB was created, Congress gave it budget autonomy — it is funded by transfers from the Federal Reserve system, and its budget is set at 12 percent of Federal Reserve operating expenses. The CFPB creators built in this feature because they knew that otherwise the Big Banks could destroy the consumer bureau by stripping its funding. This isn’t unique among banking regulators — the Fed, the OCC, the FDIC and others all share this autonomy, as it has long been recognized that our cops on the financial beat should not be subject to appropriations while policing Wall Street. Since then, the Big Banks have lobbied hard to subject the CFPB to congressional appropriations, almost explicitly for the purpose of slashing its funding and stopping it from doing its job.

S. 3318 is not following the traditional pathway to the floor of the Senate. It has not yet been debated and voted on in committee. Instead, using a special procedure, Majority Leader McConnell is taking it straight the Senate floor.

Which raises the question: Senator, what’s the rush?

Well, it just may be that Mitch McConnell brings a special passion to the issue, in the wake of the CFPB penalty on Wells Fargo.

In his 2015 financial disclosure form, McConnell reports between $1,000,001 and $5,000,000 in deferred compensation for his wife, Elaine Chao, from Wells Fargo. Chao, the former Secretary of Labor, serves on Wells Fargo’s board of directors.

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The bank paid her a not inconsiderable $291,027 in 2015 for her board service.

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Quite something, right?

We cannot assume that McConnell is acting just to punish the CFPB for imposing a modest fine on Wells Fargo for its systematic misdeeds.

It’s entirely possible — arguably more likely — that McConnell is acting to please his Wall Street paymasters, more than out of pique in response to the CFPB penalizing a megabank to which he’s unusually close.

It’s true that that can pass as a kind of ethics defense in Washington, D.C. (see theongoing case of Rep. Roger Williams, R-Texas, also an auto dealer, who is defending himself against charges of wrongdoing related to the introduction of an amendment to benefit auto dealers on the grounds that he was not trying to benefit himself but was instead doing a favor for a lobbyist for the National Automobile Dealers Association). But it doesn’t wash among Americans uncontaminated by Washington corruption.

The U.S. Consumer Financial Protection Bureau’s (CFPB) proposed rule to restrict forced arbitration – a tactic banks and lenders use to block consumers from challenging illegal behavior in court – has been met with widespread support. Below are selected highlights of comments from individual consumers, elected officials, advocacy groups and newspaper editorial boards who weighed in during the public comment period, which ended on Aug. 22, 2016.

 More Than 100,000 Consumers Across the Country Support the Rule

Between the proposed rule’s announcement on May 5, and the close of the comment period on Aug. 22, at least 100,000 individual consumers across the country submitted comments or signed petitions urging the CFPB to restrict forced arbitration in consumer finance. On the other side, FreedomWorks – a conservative political group affiliated with the Tea Party – claims it “generated nearly 15,000 responses opposed to the rule.”

Of the 100,000-plus positive comments, 69 percent of consumers voiced general support for the proposed rule, emphasizing that “[b]arring consumers from joining class actions directly opposes the public interest.” Another 31 percent pushed the CFPB to expand the rule’s coverage and “take the extra step to prohibit individual arbitration in the final rule.”comment chart
This overwhelming support for action against forced arbitration echoes a recent national poll, which found that, by a margin of 3 to 1, voters in both parties support restoring consumers’ right to bring class action lawsuits against banks and lenders.
Key Statements of Support

38 U.S. Senators commend CFPB for proposed rule

“Recognizing the urgent need to address these troubling practices, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 to improve accountability, strengthen the financial system and establish the CFPB. Dodd-Frank included several restrictions on the use of forced arbitration, including a mandate for the CFPB to take action on arbitration. Congress specifically directed the CFPB to study the use of forced arbitration in connection with the offering of consumer financial products and services, and authorized it to ‘prohibit or impose conditions or limitations on the use of’ such agreements based on the study results.”

65 members of the U.S. House of Representatives praise the rule

“Consistent with the bureau’s exhaustive study on forced arbitration, which found that forced arbitration restricts consumers’ access to relief in disputes with financial service providers by limiting class actions, the proposed rule is a critical step to protect the public interest by ensuring that consumers receive redress for systemic unlawful conduct… There is overwhelming evidence that class-action waivers in financial products and services agreements undermine the public interest.”

18 state attorneys general want to extend the reach of state enforcement efforts

“Although we believe consumers will be best served by the total prohibition of mandatory, pre-dispute clauses in consumer financial contracts and we encourage the bureau to consider regulations to that effect, the proposed rules provide a substantial benefit to consumers by restoring their fundamental right to join together to be heard in court when common disputes arise in the commercial marketplace. Many of our respective consumer protection laws include private right of action provisions, the purpose of which is to complement and extend the reach of our state enforcement efforts.”

State legislators from 14 states say the rule is “critical to restoring a healthy and vibrant federalism”

“Because of these resource limitations, states rely on the private cause of action to give effect to their consumer protection laws. Arbitration agreements that undermine the effectiveness of the private cause of action undermine the force and effectiveness of state consumer protection law too… States often serve as the ‘laboratories of democracy’ that allow for experimentation with consumer protection regulation. This experimentation is critical to the calibration of a regulatory scheme that allows for easy access to safe and affordable credit. When consumers cannot enforce state consumer protection laws, lawmakers like us cannot measure the efficacy of those laws and cannot observe the effects of those laws as they evolve through litigation. That stifles the healthy development of consumer protection laws nationwide.”

The Military Coalition, representing 5.5 million servicemembers, applauds the rule

“[Class action bans] are particularly abusive when enforced against service members, who may not be in a position to individually challenge a financial institution’s illegal or unfair practices because of limited resources or frequent relocations or deployment… Our nation’s veterans should not be deprived of the constitutional rights and freedoms that they put their lives on the line to protect, including the right to have their claims heard in a trial by a jury when their rights are violated. The catastrophic consequences these clauses pose for our all-voluntary military fighting force’s morale and our national security are vital reasons for the CFPB to act quickly to finalize the regulations.”

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A couple weeks ago, VICE did some incredible and shocking reporting about an attempt by the predatory payday lending industry to sabotage proposed rules designed to finally rein-in industry practices that have ruined lives by trapping far too many Americans into endless cycles of debt. Payday lenders take advantage of consumers by charging astronomical interest rates and fees, requiring people to take out strings of additional loans that stack up into insurmountable piles of debt.

The staggering amount of debt people are in because of payday loans is shocking, but it’s also shocking how hard industry is fighting these commonsense consumer financial protections. At least it’s shocking to those who are not familiar with corporate America’s all too successful tactic of gaming the process that agencies use to produce new regulations that benefit consumers. Industry does that by turning that very same regulatory process against the rules meant to help people. For those of us at Public Citizen who are constantly trying to defend consumer regulations from being blocked or diluted by industry, this is an all too common theme and very much the rule rather than the exception.

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The resort where payday lenders met at.

VICE uncovered insider documents at a predatory lending industry conference showing exactly how the industry planned to attack and undermine the critical new predatory lending regulations that the U.S. Consumer Financial Protection Bureau (CFPB) has proposed to put in place. The conference was organized by the Consumer Financial Services Association of America, the industry’s trade group, and held at the posh Atlantis resort in the Bahamas.

In multiple sessions, participants in the predatory lending industry learned one of the major strategies to defeat the new CFPB rules: turn the very customers the industry fleeces with high interest loans into the public face of the campaign to defeat restriction on those loans. In truly cynical fashion, predatory lenders were encouraged to “get every customer that comes into your store… to write out a handwritten letter and tell the bureau why they use the product, how they use the product, and why this will be a detriment to their financial stability.” In short, the very borrowers that would be protected from the kinds of debt entrapment loans that the CFPB will potentially prohibit would be used as the key voices arguing against those new rules.

Making matters worse, borrowers might not even know that they had signed up for this campaign to sabotage the predatory lending rules. The article describes previous attempts by the industry to trick customers into submitting comments against restrictions on predatory loans at the state level.

Of course, federal agencies do want to hear from the public about proposed rules in order to improve them before they are finalized. Indeed, the public comment period is an important way for the public to meaningfully participate in giving their opinion, as long as it’s done on a good-faith basis.

The problem here is that the predatory lending industry knows there is significant grassroots support for the new CFPB rules—no one wants loan sharks to take advantage of consumers. So they schemed to find a way to counter that with their own “flood” of comments without making it look like they are all coming from industry groups that will benefit from killing the new rules. That’s why they’re exploiting their customers and pushing them into submitting a comment.

As the article notes, making it look like there’s real grassroots opposition to the CFPB rules is a key tactic in a broader overall goal of trying to delay the new rules as much as possible so the predatory lenders can keep their business model going as long as possible.

The big takeaway is that whenever agencies like the CFPB put out new rules to protect the public by holding Big Business accountable, the response of Big Business is to use every opportunity in the regulatory process to delay rules. And as our chart of the regulatory process shows, there are a lot of opportunities — far too many, in fact.

That’s why this summer Public Citizen released a groundbreaking report showing just how long it takes for our government agencies to put in place the most important new rules that protect the public. The results were shocking. At most agencies, it takes almost an entire presidential term, four years in other words, to get out a major new rule. Even worse, the trend is going in the wrong direction, with rules finished this year holding the record for the longest rulemakings over the last twenty years. So if you’re keeping score at home, it looks like the Big Business delay strategy is working pretty well.

The good thing is there’s a way to take action. You can make sure your voice is heard in support of new proposed rules to limit predatory lending  over the fabricated ones that the industry puts forward, by taking action to support a strong rule to protect consumers from payday loans.

Finally, as some Republicans in Congress continue to try to rig the regulatory system with more opportunities for industry delay, keep a lookout for other ways to engage with your elected members to make sure they know you oppose any legislation that harms the ability of agencies to write rules to better protect the public.

Unfortunately, the theme of deregulating Wall Street comes up time and time again and this election cycle has been no exception. That’s a very irresponsible attitude when Americans are still struggling from the impacts of the Great Recession. We need more financial protections, not less.

Image via Flickr user Russ Allison Loar.

Image via Flickr user Russ Allison Loar.

Public Citizen fought alongside Senator Elizabeth Warren and our partners across the country to enact Wall Street reform legislation but it fell short and left out some key changes to rein-in harmful financial practices, like high-speed trading on the stock market. Now is the time to push for change that can stop the reckless activities of Wall Street traders.

That’s why Public Citizen supports the Wall Street Speculation Tax. Originally introduced in the U.S. in 1914, the tax was doubled as a way to speed economic recovery after the Great Depression, Public Citizen wants the United States to rejoin the around 40 countries that currently have some form of taxes on financial transactions like Wall Street trades.

As a member of the Take on Wall Street campaign, Public Citizen continues to call on Congress to make policy changes that will help cut back on some of the worst of Wall Street’s greed and excesses. Reinstating a tax on Wall Street trades is an essential part of the prescription to making the market work for Main Street and average investors. And, with the Wall Street Speculation Tax, the traders responsible for the 2008 crash would begin to repay their debt to society.

What is the Wall Street Speculation Tax?

Also known as a financial transaction tax or Robin Hood tax, the Wall Street Speculation Tax would add a fee to Wall Street trades such as stocks, bonds, and other financial instruments. Legislative proposals vary, but typically the fee would equal a few cents per hundred dollars traded, but would raise tens billions of dollars per year of revenue that could be spent on education and create jobs while reducing dangerous financial market speculation.

Who supports the Wall Street Speculation Tax?

Business leaders and financial industry professionals like Bill Gates, Warren Buffett, former Federal Deposit Insurance Corp. chair Sheila Bair and Vanguard founder John Bogle have all given their support to the Wall Street Speculation Tax. Labor unions like the Communications Workers of America and the AFL­CIO and environmental and faith groups like Friends of the Earth and NETWORK (the “Nuns on the Bus” group) have also added their voices to the growing number of organizations and individuals seeking to curb reckless Wall Street speculation.

What can I do?

Take action at TakeOnWallSt.com to sign a petition to tell Congress to reform our markets, including by passing a Wall Street Speculation Tax. Or, you can like the campaign on Facebook.

We hope that you’ll join with Public Citizen and our partners in this next phase of Wall Street reform!

Post by recently matriculated Public Citizen intern Amanda Bragg. Thanks, Amanda!

While the speeches of the Democratic and Republican conventions have been dominating traditional news and social media, behind all the pageantry a slew of special interests are pulling the strings.

Photo courtesy of IIP Photo Archive/Flickr under Attribution-NonCommercial 2.0 Generic license.

Photo courtesy of IIP Photo Archive/Flickr under Attribution-NonCommercial 2.0 Generic license.

The conventions are yet another moment to highlight what is becoming an increasingly more talked- about campaign issue: special interests’ influence in politics. This year’s conventions are expected to continue to shatter spending records. The Democratic National Convention is projected to cost $65 million and the Republican National Convention is expected to cost even more, with a price tag coming in around $71 million.

Since Congress repealed public financing of conventions in 2014, with the exception of $50 million provided by Congress for each convention’s security expenses, the rest of the money will come from special interests including corporations, unions, and lobbyists looking to gain favor with the politicians attending the conventions.

This special interest money enters the equation through “host committees,” which aren’t considered political entities and therefore do not need to disclose where their unlimited contributions come from. These undisclosed special interest dollars fund events and parties surrounding the conventions.

The presence of undisclosed special interest dollars at the conventions is problematic because it makes it impossible for the public to know whether the voices they hear at the conventions really represent the candidates or whether they represent the interests of those funding the events.

The public is becoming increasingly frustrated with a system that is rigged in favor of the super wealthy and special interests, and the conventions are another moment to draw attention to the corporate money flooding into the American political process. Polls show that two-thirds of Americans are dissatisfied with the outsized influence of corporations in America and 88% of Democratic and Republican primary voters think that the U.S. Securities and Exchange Commission should require public corporations to disclose their political spending.

Facing increased frustration, some may wonder how they can participate in changing the system. One unexpected way is through their retirement investments. Americans who invest their retirement savings with major mutual fund companies are ultimately empowering major corporations who meddle in politics.

Let’s break down how this happens.

When you contribute money to your retirement account with Vanguard, for example, Vanguard then takes your money and invests it in major corporations on the stock market. Those major corporations then turn around and spend money influencing elections and policy implementation. This spending is not required to be disclosed to the general public or the corporations’ shareholders.

Shareholders at major corporations have been asking the corporations to disclose their political spending for years. Unfortunately, those shareholder proposals rarely receive majority support because the biggest mutual fund companies, like Vanguard, can own 5 percent or more of these corporations and they tend to vote against increased transparency.

Five percent may not sound like a lot, but in actuality it translates to significant voting power in corporate elections where the fates of shareholder proposals on transparency are decided. Here’s where the average American saving for retirement comes in. Americans who invest their retirement savings with major mutual fund companies like Vanguard or BlackRock should tell the companies to support political spending disclosure at the corporations where their retirement dollars are invested.

The conventions are another instance where undisclosed political contributions are running rampant and Americans don’t know whose voices they are really hearing. Until the U.S. Securities and Exchange Commission issues a rule requiring all public companies to disclose political spending, mutual fund companies can and should represent the 401Ks and other investment accounts entrusted to them, and play a pivotal role in supporting disclosure. In turn, Americans who trust major mutual fund companies with their retirement savings should tell the companies to support disclosure whenever it comes up. Transparency is good for investors and good for our democracy.

Rachel Curley is the Democracy Associate at Public Citizen’s Congress Watch. Follow more of her work at Corporate Reform Coalition

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