The Consumer Financial Protection Bureau (CFPB) was launched in 2011 in response to the 2008 banking crisis, which destabilized millions of Americans. This new U.S. government agency’s intent was to advocate for and enforce consumer-friendly federal financial rules. It also provided a complaint and investigation process in the event of suspected company abuse.
The agency’s purview included institutions such as banks, credit unions, credit card issuers, debt collectors and student loan lenders. However, as part of the Trump administration’s federal government efficiency measures, the CFPB has been effectively shut down.
Certain federal protections may be impacted whether you’re hoping to borrow money or are currently dealing with obligations. Here’s how to safeguard yourself, with or without the CFPB.
CFPB Oversees Consumer Credit and Debt Laws
The CFPB has been enforcing many federal laws protecting consumers’ credit opportunities and debt situations.
For example, the Equal Credit Opportunity Act prohibits lenders from making discriminatory credit decisions, and the Fair Credit Reporting Act governs the way credit bureaus collect, maintain and share consumer credit data.
The Truth in Lending Act ensures that lenders must clearly disclose key terms and costs, as the Fair Credit Billing Act protects consumers against unfair billing practices and errors in credit card transactions.
Meanwhile, the Credit Card Accountability Responsibility and Disclosure Act shields cardholders from unjust rate hikes, mandates clear disclosure of terms and fees and limits penalties for exceeding credit limits.
And if a debt goes to collections? Consumers have rights under the Fair Debt Collection Practices Act, which bans harassment, false or misleading representations and unfair practices by third-party debt collectors.
[Read: How to Negotiate With Debt Collectors]
Although most of these laws were enacted long before the CFPB, the agency was tasked with enforcement. If companies broke the law, consumers could submit a complaint and the agency would investigate.
Consumer Laws Remain, but Complaints Will Go Elsewhere
The good news is that even if the CFPB shrinks, changes in scope or even closes permanently, consumer protection laws will remain in effect.
“Consumers still likely have options to report abusive or improper business practices,” says Christopher E. Roberts, a class action attorney at Butsch Roberts & Associates in Clayton, Missouri, representing consumers in cases involving debt collectors, high-interest lenders and debt resolution companies.
“As one example, at the federal level, complaints concerning improper debt collection practices may be reported to the Federal Trade Commission (FTC),” he says.
The FTC also handles disputes related to checking and savings accounts, loans and credit cards and credit reporting, but it’s not the only federal agency that can assist consumers. The Office of the Comptroller of the Currency (OCC) helps customers of national banks, federal savings associations and federal branches and agencies of foreign banks resolve issues.
At the state level, consumers can also contact their attorney general for assistance.
As a consumer, you also have the option to retain your own lawyer. Under many consumer protection laws, individuals possess a private right of action, which enables them to file lawsuits against businesses for violations.
[Related:Medical Debt Will Now Be Wiped From Credit Reports]
Expect a Slowdown in Response and Remedy
According to Felix Shipkevich, a special professor of law at Hofstra University who works with the CFPB and represents debt relief companies, all federal statutes remain in play. Still, if you request assistance from federal or state agencies, response time and remedies could slow down.
“The CFPB is relatively young,” Shipkevich says. “Before that, the FTC protected consumers, and it still does. However, the states don’t have the resources to immediately step in and provide the same level of assistance from the federal government. The CFPB had 1,700 plus employees. Losing them is significant.”
Expect delays until more professionals are hired and any kinks are worked out.
Priorities have shifted, too.
“While consumers can certainly make complaints about improper business practices to different federal agencies besides the CFPB, the critical issue is whether this administration will push these agencies to enforce consumer protection laws,” Roberts says.
“In other words, a complaint serves little purpose if the agency does nothing to hold accountable a business that is not acting in accordance with the law,” he adds.
Credit Card Fees Might or Might Not Decrease
The CFPB has been advocating for measures to slash what it considers excessive credit card late fees. The agency estimated that lowering the penalty from a common $32 to no more than $8 would save cardholders an average of $220 per year.
With the agency curtailed, the current fee structure may remain in place. Still, this may sideline negative downstream effects, says John Buhrmaster, president and CEO of 1st National Bank of Scotia in New York.
As a member of the CFPB’s Community Bank Advisory Council and Federal Reserve Bank of New York board member, Buhrmaster believes lowering the fees too much could cause other problems.
“An $8 penalty for missing a due date won’t be much of a deterrent for many cardholders,” says Buhrmaster. “It might have led to an increase in the practice.” When many account holders are frequently delinquent on payments, it can strain finances and lead to losses.
The open door to easy credit may also close for consumers with debt troubles.
“People with bad credit may experience less access to products,” Buhrmaster says. “The CFPB also helped ensure that banks offered credit to financially risky individuals.”
CFPB and Personal Debt: Know How to Manage Your Money When You’re Struggling
Knowing that the CFPB exists as a federal defense against lenders that break the law and abusive collectors may have been comforting, especially for people in financial trouble.
If you’re in debt and struggling to meet the payments, you may not need a government agency to step in on your behalf. Here is how to fix your credit problems on your own:
— Communicate with your creditor. Before you start missing payments, contact the credit issuer. You may be able to work out a hardship plan that allows you to pay a smaller payment with fewer fees.
— Fix inaccuracies with the credit bureaus. Use the bureau’s online dispute process if you believe you have satisfied a balance or the debt is incorrect or fraudulent, but it is showing up on your credit report. They have 30 days to investigate the matter.
— Get free financial counseling. Nonprofit credit counseling agencies can help you rearrange your budget, offer advice and suggest resources. If you’re eligible, you may be offered a debt repayment plan.
[Related:How 4 People Paid Off Debt in Record Time]
Stay In Control With or Without the CFPB
“Eliminating the CFPB or making it effectively powerless would be a bad development for consumers,” Roberts says. “However, it does not make consumer protection laws disappear.”
The law is on your side, so there is no reason to panic. Financial institutions will continue to develop and offer products and services to a wide range of people. They always want to keep responsible borrowers happy.
Your best course of action remains the same, whether the CFPB returns or not.
Establish a strong credit history by treating all of your accounts responsibly. This way, you’ll not only keep the fees associated with credit cards and loans to a minimum but will become an attractive borrower to other lenders. Keep debt out of collections by paying on time.
If you experience a problem, first try to work out a solution with your original creditor, and if you need professional guidance, make an appointment with a credit counselor.
Read all credit contracts thoroughly, too. If you don’t understand the terms, don’t sign. Contact the lender for clarification or ask a trusted third party to assist.
And if financial institutions break any of the consumer rules on the books, don’t hesitate to call them and take any necessary action if they aren’t responsive. Although the CFPB had been the first line of defense for many consumers, the agency isn’t the only way to get help.
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What Debt Protections Could Consumers Lose Without the CFPB? originally appeared on usnews.com
