The collapse of the housing bubble in 2007 showed how little attention federal regulators had paid to predatory, deceptive and fraudulent practices by lenders. That is why, as part of the Dodd-Frank Financial Sector Reform Act of 2010, Congress created an independent consumer financial protection office with the power to make and enforce rules for lenders, debt collectors and other consumer service providers.
What the authors of the bill did not envision, however, is that the office would care about consumer protection as much as the president who appointed its director. And since the departure of the office’s initial chief Richard Cordray, President Trump has installed trustees who were either outwardly hostile to his very mission or determined to overthrow the good he had done.
That’s why Gov. Gavin Newsom included in his January budget proposal a plan to give Californians better protection against unfair or deceptive acts and practices, no matter who runs (or stifles, as the case may be) the CFPB. federal. Such acts and practices are already illegal under California law, but the power to deal with them is dispersed among various state agencies or, in the case of unlicensed and unregistered businesses, is not granted to any agency. at all. The governor’s plan, which the legislature is still reviewing, would give the state’s Department of Business Surveillance the ability to apply the same rules to all businesses vying to serve California consumers.
The current patchwork of supervisory responsibilities leaves too many loopholes that allow unscrupulous lenders to evade law enforcement. It should be in the best interests of all responsible businesses and consumers that everyone follow the same rules.
Nonetheless, professional associations of bankers, payday lenders, debt collectors and 14 other groups with an interest in financial services are pushing lawmakers to exempt their members from the scope of the bill. Just focus on the companies that aren’t licensed or regulated today, they say, as if the current regulatory regime is doing a terrific job of keeping them on track. They also argue that the current recession is a bad time to expose them to greater scrutiny and a proliferation of state rules.
They couldn’t be more wrong. Bad economic conditions lead to bad practices in the financial sector. As with clean air and water rules, California must provide a basis of protection for borrowers and state savers who will be there, regardless of what the federal government is doing – or in what. case, of what he stopped doing.