For more than a decade, consumers have lauded the Consumer Financial Protection Bureau (CFPB) for its myriad accomplishments that have brought transparency and fairness to the financial marketplace. Earlier this year, a survey commissioned by the Center for Responsible Lending found that 82% of Americans believe it is important to regulate financial services to ensure they are fair for consumers.
Research, regulation, investigations and litigation were among the effective tools CFPB used to return more than $21 billion to over 200 million defrauded consumers.
At the same time, the anti-regulatory interests that opposed CFPB’s creation never stopped trying to weaken, defy or eliminate the agency. Now with a president and Congress actively embracing a deregulatory stance, the combination of pro-business presidential executive orders vigorously pursued by executive appointees have wreaked financial harm on consumers and compromised the agency’s mission.
From slashing CFPB staffing by 70%, halting both investigations and pending litigation, to reversing regulations on overdraft and credit cards, in recent days a third anti-consumer move announced the agency would not enforce regulation of “buy now, pay later” credit. In sum, today’s agency actions no longer reflect its name or mission.
Yet the fight to neuter CFPB is still not done. It is now moving monies — denying or delaying millions that consumers are rightfully owed, and sending billions of dollars earmarked for victim compensation to the U.S. Treasury instead.
A pending, real-life case illustrates the harm wrought by such moves, and the financial injustice that results.
In February, several state attorneys general began restitution inquiries owed by Prehire, LLC. Earlier, CFPB determined that Prehired, LLC, an unlicensed online sales training program, violated two federal laws: the Truth in Lending Act, and Fair Debt Collection Practices Act. The firm lured prospective tech sales students with false promises of guaranteed minimal annual earnings of $60,000 at a “tech company of their choice.” The cost per student was half that amount — $30,000. Then the firm sold loans to its students to cover enrollment costs.
A March 12 joint letter to CFPB that asked about the status of payments to Prehire’s victims failed to receive a reply. On May 6, a follow-up letter restated their earlier concerns.
Terming Prehire as “a predatory online training bootcamp,” the state attorneys general in Colorado, Delaware, Illinois, Massachusetts, Minnesota, New York, North Carolina, Ohio, Oregon and South Carolina as well as the California Department of Financial Protection and Innovation, wrote in part:
“Prehired trapped its students with illegal and deceptive ‘income share’ loans. Prehired then resorted to abusive debt collection practices — including filing hundreds of debt collection lawsuits — when students could not repay those loans and the job offers Prehired promised did not materialize. Prehired specifically targeted military veterans with its advertising.”
The attorneys general further explained, “Prehired was in bankruptcy and unable to issue refunds to its victims. In such cases, the CFPB’s Civil Penalty Fund is available to compensate harmed victims. Our offices worked with the CFPB to secure an allocation from the Civil Penalty Fund, in the amount of $4,248,249. The CFPB finalized the allocation on May 30, 2024.”
Ironically, a recent party-line vote by the House Financial Services Committee (HFSC) approved a resolution to remove CFPB’s ability to repay defrauded consumers from its Civil Penalty Fund (CPF). If subsequently passed by Congress, the fund’s unallocated revenues would be given to the Treasury Department, instead of remaining available to compensate victims.
Billions of dollars are at stake. In June 2024, the Office of Inspector General at the CFPB reported that the CPF had collected $3.4 billion and held a balance of $1.9 billion, as of September 2023. Much of that balance came from a $1.7 billion fine levied against Wells Fargo Bank, according to a February report by the Congressional Research Service.
An important part of the law creating CFPB designated the CPF to be used for payments to legally defrauded victims or – when available — for consumer education and financial literacy programs. The law also identifies the fund’s administrator as the official responsible for supervising payments. Additionally, every six months the administrator sets aside monies for payments to harmed consumers.
Democratic members of HFSC offered multiple amendments as alternatives, rather than ceding monies to Treasury. For example, Massachusetts Rep. Ayanna Pressley proposed that bad financial actors would bear the financial burden for funding when their practices violated applicable laws. This and other amendments made by committee Democrats were also rejected by majority members.
“[M]y Republicans colleagues are telling their constituents loud and clear that they care more about protecting their friends on Wall Street than the people who voted to send them here,” New York Rep. Greg Meeks, also a committee member, stated.
Christine Hines, senior policy director at the National Association of Consumer Advocates, added, “It’s not really about saving taxpayer money or anything related to the budget. It’s about getting rid of the Bureau.”
Charlene Crowell is a senior fellow with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.
