In just a couple of days, the Consumer Financial Protection Bureau will celebrate its first birthday, and it’s an achievement worth celebrating. Indeed, as we saw yesterday, the agency – created by President Obama, spearheaded by Elizabeth Warren, and led by Richard Cordray – is already doing important work on behalf of American consumers.
The nation’s consumer watchdog on Wednesday delivered its first enforcement action against the financial industry, fining Capital One for pressuring and misleading more than two million credit card customers.
Capital One, one of the nation’s biggest banks and credit card lenders, agreed to pay $210 million to resolve a pair of regulatory cases, the latest legal setback for the financial industry.
The Consumer Financial Protection Bureau, Wall Street’s newest regulator, accused Capital One of “deceptive marketing tactics.” The credit card company – which is known for its catchy television ads, asking “what’s in your wallet” – received a regulatory rebuke for misleading card customers into buying unnecessary products like payment protection and credit monitoring, according to the consumer agency.
As part of the settlement, Capital One won’t admit wrongdoing, but it will pay between $140 million and $150 million in restitution to 2 million Capital One customers, putting that money right into the pockets of those who fell victim to deceptive marketing.
CFPB Director Cordray announced, “We are putting companies on notice that these deceptive practices are against the law and will not be tolerated.”
Having a watchdog protect American consumers against industry abuses and excesses may, regrettably, not last. Congressional Republicans, honoring the wishes of financial industry lobbyists, are eager to eliminate the CFPB, and if Mitt Romney is elected president, has promised to destroy the agency. (Two months ago, the Romney campaign told the Wall Street Journal that gutting the Consumer Financial Protection Bureau would be a key element of the Romney economic agenda.)
But in the meantime, the CFPB is a BFD.
In fact, my former colleagues at the Washington Monthly have a fascinating item in their new issue from John Gravois, making the case that the Consumer Financial Protection Bureau is an under-appreciated success story. Ed Kilgore summarized:
Well-designed, well-staffed, and very aggressive in its start-up efforts, the CFPB aims at changing the dynamics of the financial industry – or at second best, exposing and therefore reducing its predatory tendencies – by thoroughly understanding its use of behavioral economics, data-mining, and other “twenty-first century” strategies that have wreaked havoc on consumers and ultimately the U.S. economy.
The CFPB has a brilliant staff, sophisticated tools, and a noble mission. Happy Birthday, CFPB – and when I say “many happy returns,” I mean it.