All Talk, No Action on Consumer Protection

There is no such thing as a "Consumer Financial Protection Bureau." That’s a false label. Rather, there is a Bureau of Consumer Financial Protection ("BCFP," if you like), established by Title X of the "Dodd-Frank Act."

So, why do the promoters and officials of this organization misstate even its name?

The most obvious reason is to put the "consumer" first, churning out daily election year headlines repositioning Obama as consumer champion — as far as possible from his rightful place as the Herbert Hoover of our century.

With the earlier emphasis on "bureau," perhaps Prof. Warren originally wanted to imply that she'd pursue financial criminals like a latter day Eliot Ness or J. Edgar Hoover. But Hoover had 5 years of relevant federal experience when he started at the FBI vs. 0 for Cordray.

So far, the "CFPB" hasn't gone after many of the bad guys, even when their misdeeds are chronicled in the press and in civil court filings. Nor has it proposed, even informally, rules to curb known abuses. Rather, it has consistently and steadily produced talk, political pronouncements and press releases rather than consumer protection — ever since its staffing began 16 months ago. If there are actually people, maybe rogue bankers or far right libertarians, who don't think consumers deserve any protection at all — then they should be overjoyed by Cordray's track record to date. All motherhood, no muscle.

An example: debit card transactions are authorized (or declined) by banks at the time of the purchase or cash advance. Whether or not a paid debit caused an overdraft must be determined as of that time. However, in recent years, many banks began debiting all the day’s card transactions from largest to smallest rather than in time sequence, in order to generate much higher overdraft fee revenue. It was a highly remunerative strategy.

This practice seems unfair, deceptive and abusive, whether or not disclosed or included in an account agreement. There shouldn't be an "overdraft fee" for any item which, when authorized, did not constitute an overdraft.

This is no small thing. Nine-figure amounts are involved. And the consumers who are hurt are primarily those who are in financial difficulty or who lack the skills or intelligence to manage a checking account responsibly. Same people that gravitate to payday lenders and prepaid cards, particularly when they are charged bank fees that they can't understand because the fees don't make sense.

Any regular reader of this newspaper has seen reporting of class action settlements, with B of A and others, reported to recover from 10% to perhaps 40% of the excessive overdraft fees. But, why aren't the consumers getting 100%, or more? Why shouldn't the institutions charging these improper fees be additionally penalized? Why should consumers have to wait to see if class action lawyers pursue a particular bank—and then perhaps make settlements that are better for the lawyers and the bank than for customers?

This has been passing through the courts and the newspapers. The "CFPB" hasn't been using its authority to pursue needed rule-making action to prevent further abuse of consumers. It hasn’t taken enforcement action to recover their money. Instead, it's been issuing press releases touting Holly Petraeus and Hubert Humphrey Jr.

It's been pontificating about picking the targets with "highest risk," and about non-bank examinations which are the same as for banks except that they're not the same. Plus some generalized mumbling about possible faulty disclosure by unspecified payday lenders; lots of mutual back patting with other regulators, even NCUA's Debbie Matz; and some requests for comments that raise more questions than they answer.