Consumer Battles: How CFPB Funding and Political Shifts Impact Your Finances

Prepare to uncover the truth about your financial protection and what the future holds for the Consumer Financial Protection Bureau (CFPB) as we edge closer to the 2024 election. Why does it matter who funds the CFPB, and how could these political decisions impact your wallet?

Join Wendy Gilch, in this special episode of the Real Estate Replay, where we promise you'll gain insights into the tug-of-war between oversight and independence affecting one of the most influential consumer watchdogs in the financial realm.   We also discuss a few people that are currently up for re-election, how financial institutions contributed to his campaign, and how he would like to defund the CFPB all together.

From its powerful beginnings under the Obama administration to a more restrained role during the Trump era, we explore how varying political philosophies have shaped the CFPB's effectiveness. We shed light on the ongoing debates about its funding and operational freedom, crucial factors that could redefine the real estate market and your financial security. Whether you're buying a home, opening a bank account, or applying for a credit card, understanding these dynamics is essential. Tune in to learn strategies that will empower you to make informed financial decisions, regardless of the shifting political landscape.

CFA study on the CFPB during the Trump administration

State laws and regulations may vary.

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Transcript

Speaker 1: 0:01

Welcome to a fresh season of the Real Estate Replay. This season, we're diving even deeper into the world of real estate to bring you the insights and strategies that matter most to consumers. Whether you're buying, selling or just curious about what really goes on behind the scenes, we've got you covered. We'll break down the latest news, unravel the most recent of many legal challenges and share stories that help you make smarter decisions. Welcome back to the Real Estate Replay.

Speaker 1: 0:33

I'm Wendy Gilch, and today you're stuck with just me, for this special episode focused on an important voting issue ahead of the 2024 election consumer protection and the future of the Consumer Financial Protection Bureau, which most of you know as the CFPB. Now, before we get started, I want to make it clear I'm not here to tell you how to vote. Instead, I want to help you understand how different administrations have approached consumer protection, particularly when it comes to the CFPB, and what that could mean for you as a home buyer, a homeowner, someone purchasing a car, opening a bank account, applying for a credit card and many other ways that we involve ourselves with the financial industry. And with the election approaching, especially for one or two particular people, it's important to know how these policies might shape the real estate market and affect your finances and protection in the future. So first let's talk about what the CFPB is and why it was created. So back in 2011, following the 2008 financial crisis, the CFPB was established as a watchdog for consumers. Its mission To make sure that financial companies like mortgage lenders, student loan services and credit card issuers treat consumers fairly. Over the years, the CFPB has taken on some pretty big players in the financial industry, cracking down on unfair practices and hidden fees. It's been a valuable tool for protecting us from predatory behavior that could jeopardize an everyday consumer's finances, and also including how we buy or refinance homes. Over the years, the CFPB has taken on some pretty big players in the financial industry that no lawyer would ever be able to tackle on their own. By cracking down on unfair practices and hidden fees, it's been a valuable tool for protecting us consumers from predatory behavior that could jeopardize our finances. So let's dig into why the 2024 election is so important for the future of the CFPB.

Speaker 1: 2:42

The way the agency operates and how it's funded has been hot topics in Washington for years. You see, the CFPB is currently funded by the Federal Reserve, which means its budget doesn't go through Congress and this funding structure was intentional and it was set up to keep the agency independent from political influence because you know, those financial industries have got a lot of money put into lobbying. However, critics argue that this independence gives the CFPB too much power with not enough oversight. So let's talk about how administrations have handled this differently. Under the Obama administration, when the CFPB was first established, the agency was given broad authority to write and enforce rules to protect consumers. It was proactive in going after financial companies that engaged in misleading or deceptive practices and within the six years that the CFPB was operating under the Obama administration, they pulled in around $12 billion in relief for consumers through enforcement actions $12 billion in relief for consumers through enforcement actions.

Speaker 1: 3:50

But when the Trump administration took over, the approach shifted and while the CFPB's funding still came from the Federal Reserve, enforcement activity significantly slowed. During this time period, trump went through two directors one that resigned after the January 6th incident and the other one who finished out the term and this agency only collected $4 billion in fines and consumer relief for the whole era. They also spent a lot more time focusing on reducing regulations that were put in place because they were perceived as burdensome to businesses and, as a result, the number of enforcement actions drastically decreased. According to the Consumer Federation of America, the number of enforcement actions drastically decreased. According to the Consumer Federation of America, the number of public enforcement cases announced in 2018 declined by 80% from the CFPB's peak productivity in 2015. And the average monetary relief per case awarded to victims of illegal consumer financial practices declined in the Trump administration by 96%. Under the Obama administration, the CFPB awarded an average of $60 million in consumer restitution per case, but under Trump's second director of the CFPB, the average consumer relief has declined to $2.4 million per case. Under the Biden administration, enforcement has ramped up once again, and since 2021, the CFPB has secured nearly $9 billion in relief for consumers, targeting illegal practices like discriminatory lending, junk fees and predatory loan practices. In 2023 alone, the agency collected over $3 billion through various enforcement actions, reflecting a return to a more proactive consumer protection.

Speaker 1: 5:32

And now we're heading into the 2024 election and the stakes are high for the CFPB's future. If a Republican wins the White House, we could see more efforts to limit the agency's power or even change its funding model. And this brings us to Senator Ted Cruz, who's been a vocal critic of the CFPB for years, he's introduced bills to eliminate the CFPB altogether, calling it an unaccountable bureaucracy that hampers economic growth. Now, it's worth mentioning there were four other Republican senators that tried to push this through, but since Cancun, cruz is the only one up for reelection this year. That's why we're pointing him out.

Speaker 1: 6:12

And now here's where things get really interesting. The financial industry has a lot of skin in the game when it comes to the future of the CFPB. In fact, it's estimated that financial companies and other groups spend around $600 million a year on lobbying to influence Congress on regulatory issues, including the future of agencies like the CFPB. These lobbying efforts aim to shape legislation, influence lawmakers and push for regulatory changes that could make it easier for businesses to operate with fewer restrictions. This amount of money shows just how high the stakes are when it comes to controlling financial regulations. In the US, senator Cruz, for example, has been a significant recipient of contributions from lobbying groups connected to the financial industry. It's estimated that Cruz has received over 2 million in campaign donations from the financial sector lobbying groups throughout his career. These contributions come from banks, insurance companies and other financial institutions like payday loan companies. That would benefit from a less aggressive regulatory environment, and this is why the CFPB needs to stay funded through the Federal Reserve, because if it's funded through Congress, this lobbying power will influence the decision. That may not benefit consumers, but will sure benefit financial institutions If things change.

Speaker 1: 7:37

Imagine trying to buy a home and not being sure whether your lender's being upfront about all the costs involved. Or what if you're refinancing and the terms of your new loan are confusing or not even fully disclosed. In fact, the loan estimate that you get now that looks like everyone else's loan estimate was created by the CFPB back in 2015. Was created by the CFPB back in 2015 to hopefully simplify and improve the disclosure forms used in the mortgage process by combining elements from the Truth in Lending Act and the Real Estate Settlement Procedures Act, known as RESPA. Even more so, the uncertainty of financing can be even more challenging for minority borrowers, who have historically faced discriminatory lending practices that limit their access to fair financing. In fact, the CFPB just went after a mortgage company this month that did that exact same thing. The CFPB has played a crucial role in developing fair lending practices, but it also takes action against excessive late fees, credit card fees, banking fees and hitting charges that can affect anyone.

Speaker 1: 8:43

Any changes to how the CFPB is funded or operates could weaken these protections, making it harder for consumers to ensure they're being treated fairly and transparently throughout any financial process. So there is a logical philosophical difference at play when it comes to regulating financial markets and protecting consumers. Some believe that stricter regulations and a strong CFPB are essential for leveling the playing field and holding big financial institutions accountable. Others, like Ted Cruz and some Republican lawmakers, argue that regulations go too far and stifle economic growth. They proposed that Congress you know the land of financial lobbying should be the one to back the CFPB's power and even their budget.

Speaker 1: 9:28

We wanted to take a minute to share this with you, as the CFPB funding and consumer protection doesn't necessarily ever make the debate stage how cats and dogs do, I don't know but we thought it was important for you to understand how each side looks at consumer protection and how things have changed between the different administrations. So, before you go to the voting booth, listen to what the candidates are saying about financial regulations and consumer protection. Lobbying is a huge deal in Congress, so not only should you be listening to what your candidate is saying, but you should also be looking at who's backing them. You can go to websites like followthemoneyorg or opensecretsorg so that you can see who's financially backing your candidate. Who wins this election is going to have a direct impact on your next real estate transaction, the safety of your finances and your rights as a consumer.

Speaker 1: 10:22

That's it for this special little voting episode of the Real Estate Replay. We'll be back next week with your favorite juicy consumer experience stories and other things you need to know that go on behind the curtain of the real estate industry. And if you found today's discussion helpful, please share it with someone who could benefit before they go to vote. See you next time. Have a story or a question you want to share? Hit us up at therealestatereplaycom.