[Congressional Record Volume 169, Number 162 (Tuesday, October 3, 2023)]
[Senate]
[Pages S4912-S4914]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
Consumer Financial Protection Bureau
Mr. REED. Mr. President, after hearing oral arguments earlier today,
the Supreme Court will rule on a case that will determine whether
average Americans will continue to have an independent Federal watchdog
to push back against the abuses of big financial institutions.
The case I am speaking of is the Consumer Financial Protection
Bureau--CFPB v. Community Financial Services Association of America. It
deals with an outlandish ruling of the Fifth Circuit Court of Appeals
that would invalidate the congressionally approved funding scheme of
the CFPB. If it stands, the ruling will starve the Bureau of funding
and effectively prevent it from working on behalf of the American
people.
But let's take a step back to remember why the CFPB was created over
a decade ago.
In the runup to the great recession, lenders were aggressively
marketing subprime mortgages with predatory features to borrowers they
knew had no ability to repay. Reckless Wall Street firms bundled those
mortgages into securities and sold them to investors, including pension
funds. And weak regulators stood by as all of this unfolded.
Borrowers ultimately discovered that they could not repay their
mortgages. The securities backed by these mortgages took a nosedive,
causing a meltdown of the banking system and taking down the entire
economy.
While Wall Street got a lifeline from the Congress and the Federal
Government, millions of Americans did not. They paid with their jobs,
their homes, and their savings.
The unemployment rate peaked at 10 percent; nearly 7.5 million
families lost their homes; and Americans lost $20 trillion in household
wealth.
At the time, people rightfully asked who was looking out for them.
The truth was no one, really.
American families were ill-served by financial regulators and by the
system. A half dozen Federal Agencies shared responsibility for making
sure that working families didn't get ripped off, but they all failed.
In many cases, they seemed to regard their primary mission as
protecting the big players in the financial system. And they were
hamstrung by the Bush administration, which used the appropriations
process to starve Agencies, like the SEC, of the resources and
personnel they needed to be effective.
So while these Agencies all had some responsibility for protecting
consumers, none of them pursued it vigorously. The performance of
regulators at the time put truth to the saying that ``when everyone is
responsible, no one is responsible.''
This weakness in our regulatory system and structure is why Congress
created the CFPB and gave it a singular mission to protect Americans
from the worst kinds of financial abuses, not just for mortgages but
for every single consumer financial product.
The creation of this Agency is arguably one of the most important
reforms made following the financial crisis.
I recognize that Wall Street and big financial companies have always
feared the CPPB. That is because the CFPB is the only financial
regulatory Agency that exclusively focuses on protecting consumers
against abusive practices.
But Wall Street also fears the CFPB because its funding structure
insulates it from regulatory capture, aggressive lobbying, and
political pressure. Wielding its power judiciously and effectively, the
CFPB has delivered results for American families. In a little more than
a decade, the Bureau has obtained $17.5 billion in relief for 200
million consumers.
[[Page S4913]]
And so, the industry has never given up on killing the CFPB. The
industry hit pay dirt when an activist panel of judges on the Fifth
Circuit Court of Appeals issued a bizarre and potentially sweeping
decision, which invalidates the CFPB's funding structure based on a
distortion of the Constitution's appropriations clause. The court's
reasoning is flimsy. It relies on a single concurring opinion and a
series of law review articles, some of which were written by students.
(Mr. KELLY assumed the Chair.)
According to Georgetown Professor Adam Levitin, the argument about
the CFPB's funding was a ``throw-away point'' in the litigation, with
the parties dedicating a paltry 370 words apiece to this issue in their
briefs.
Unfortunately, the results of the Fifth Circuit's decision are not
academic. They are very real for the hard-working Americans whose
financial well-being is now at risk. If upheld, the Fifth Circuit's
ruling would call into question the validity of all the Bureau's past
actions.
The work of the CFPB matters to ordinary people. It is the only
Federal Agency that supervises nonbank mortgage lenders, private
student lenders, credit reporting bureaus, debt collectors,
international money remitters, and auto finance companies. Because
there has been a CFPB for the last decade, people in Rhode Island and
across the Nation have had someone who is working to make sure they
will be treated fairly, that their banks and lenders will deal with
them honestly, and that their interests would be protected whenever
financial institutions try to take advantage of them.
That will change if the Fifth Circuit's ruling stands.
I want to particularly highlight what that means for military
families because this has been an aspect of the CFPB's authority that I
have been deeply committed to since the beginning. Simply put, without
the CFPB, military families will be stripped of their financial
protections under the Military Lending Act. The CFPB has brought 40
public enforcement actions involving harm to servicemembers and
veterans, securing more than $175 million in relief.
The Agency plays a unique role in watching out for our Nation's 2
million servicemembers and their families, whether they are deployed in
the United States or overseas. The CFPB protects members of the Armed
Forces from exploitation at the hands of unscrupulous lenders and debt
collectors, who have charged servicemembers interest rates as high as
600 percent and who have threatened to derail their careers if they do
not pay up.
More than recovering money, the CFPB, through its supervisory powers
and by its simple existence, acts as a deterrent. If the Supreme Court
shuts it down, predatory lenders will reoffend against our troops again
and again and again, with little chance of being penalized.
The Presiding Officer understands this very well because, as a naval
aviator and leader of troops, like myself, who was a paratrooper,
executive officer, and company commander, we saw all the shenanigans
that lenders were playing, selling trucks to the young enlisted people
for a great bargain--nothing down but almost a 1,000-percent interest
rate. We saw them come and take those trucks later when the young
soldiers, sailors, and airmen couldn't pay--time and time again.
Finally, through the Military Lending Act and the CFPB, we stood up
and said: This is not fair. And in one of the great ironies, of course,
if you ever went off base, all of these car dealers and other service
agencies proudly had the American flag waving red, white, and blue,
while they were systematically, in many cases, stealing from the men
and women who protect this country.
In a letter written to Banking Committee Chairman Brown, Veterans'
Affairs Committee Chairman Tester, Intelligence Committee Chairman
Warner, and myself, in February, the CFPB Director said:
I am gravely concerned that this trend could impact
companies' compliance with the Military Landing Act and the
Federal consumer financial laws that protect servicemembers
and their families. The impact would be dire--effectively
stripping servicemembers and their families of legal
protections that are critical to maintaining military
readiness. . . . In the Fifth Circuit alone, which covers
Texas, Louisiana, and Mississippi, this could affect 300,000
servicemembers and their families.
Mr. President, I would ask unanimous consent that a copy of the
letter from the Director of the Consumer Financial Protection Bureau be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Consumer Financial
Protection Bureau,
Washington, DC, Feburary 6, 2023.
Hon. Jack Reed,
U.S. Senate,
Washington, DC.
Dear Senator Reed: Thank you for your letter regarding the
Consumer Financial Protection Bureau's (CFPB) work to protect
servicemembers and their families in the consumer financial
marketplace. As you note in your letter, a three-judge panel
of the Fifth Circuit recently vacated the CFPB's 2017 payday
lending regulation in Community Financial Services
Association v. CFPB. The Fifth Circuit panel found that the
statutory provisions funding the CFPB's operations violate
the Constitution's Appropriations Clause, and as a result,
vacated the payday lending rule that is the subject of that
litigation.
I believe that decision was incorrect, and the Solicitor
General has asked the Supreme Court to reverse it. In the
Dodd-Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank Act), Congress established the CFPB as an
independent bureau of the Federal Reserve System. Like the
Federal Reserve Board of Governors and other federal banking
regulators, Congress authorized the CFPB's funding through
its organic statute rather than through annual spending
bills. This type of funding for banking regulators has long
been a vital part of the nation's financial regulatory
system, providing stability and continuity for the agencies
and the system as a whole.
The CFPB's Work to Protect Servicemembers and their Families
In the Dodd-Frank Act, Congress directed the CFPB to
establish an Office of Servicemember Affairs. Since the
CFPB's inception, the CFPB's Office of Servicemember Affairs
has worked with the Department of Defense, state attorneys
general, and other law enforcement agencies to ensure
America's servicemembers, veterans, and their families
receive the consumer protections they are entitled to by law.
Each year, the Office of Servicemember Affairs issues a
report on the top financial concerns facing servicemembers,
veterans, and military families, based on complaints they
submit to the CFPB. In its most recent annual report, the
Office of Servicemember Affairs noted a nearly 20 percent
increase in complaints by servicemembers since 2019 and
detailed how servicemembers credit reporting inaccuracies
uniquely impact their housing, transportation, and security
clearance. A separate CFPB report released in December 2022
found that servicemembers appeared to be underutilizing the
protections and relief they are entitled to under the
Servicemember Civil Relief Act, which include a six percent
interest rate cap. Previous CFPB research compared
servicemembers' credit usage to their civilian counterparts
and identified debt trends among servicemembers during and
after they leave active duty.
The CFPB examines supervised financial institutions for
risks to active duty servicemembers and their families from
conduct that violates the Military Lending Act (MLA).
Additionally, when the CFPB identifies Servicemember Civil
Relief Act (SCRA) violations or an absence of SCRA compliance
policies and procedures, we refer the matter to appropriate
federal and state regulators and assess whether the conduct
may also violate other statutes we enforce, such as the
Consumer Financial Protection Act. And when companies break
the law and harm servicemembers, the CFPB brings enforcement
actions to hold them accountable. To date, the CFPB has
brought 38 public enforcement actions that involved harm to
servicemembers and veterans, including five enforcement
actions for violations of the Military Lending Act. These
cases have thus far resulted in more than $170 million in
monetary consumer relief.
Here are a few recent examples that illustrate the impact
of this work:
In September 2022, the CFPB filed a lawsuit against
MoneyLion and its lending subsidiaries alleging they violated
the MLA by charging consumers membership fees and stated
interest rates that when combined exceeded the MLA's 36% rate
cap, requiring covered borrowers to submit to arbitration,
and failing to make required disclosures. The CFPB's
complaint also alleges that MoneyLion's restrictive
membership cancellation practices are deceptive, unfair, and
abusive.
In November 2021, the CFPB filed a lawsuit against
FirstCash, Inc. and Cash America West, Inc. The CFPB alleges
that FirstCash and Cash America West made pawnshop loans to
active-duty servicemembers and their dependents that violated
the MLA. The CFPB alleges that between June 2017 and May
2021, FirstCash and Cash America West made over 3,600 pawn
loans from four of its stores to more than 1,000
servicemembers in Arizona, Nevada, Utah, and Washington at
rates that exceeded the MLA's 36% interest cap, as well as
other violations.
[[Page S4914]]
In December 2020, the CFPB issued a consent order against
Omni Financial of Nevada, Inc. The CFPB found that, among
other things, Omni violated the MLA's prohibition against
requiring repayment of loans by allotment. While Omni claimed
that other payment options were available, the CFPB found
that employees told servicemembers they were required to
repay by allotment, and records show that 99 percent of
active-duty servicemembers who took out loans repaid them via
allotment. The CFPB uncovered these violations as part of a
sweep of investigations of multiple lenders that were
suspected of violating the MLA.
Also in December 2020, the CFPB sued LendUp for violating
the MLA by charging interest in excess of 36 percent,
requiring covered borrowers to submit to arbitration, and
failing to make required disclosures. The parties entered
into a stipulated judgment in that action in early 2021. In
December 2021, the CFPB sued LendUp again for violating that
order. The parties entered into a stipulated judgment that
resulted in a court order that prohibited the company from
making new loans and collecting on outstanding loans.
Impact of the Fifth Circuit Ruling on the CFPB's Protection of
Servicemembers
The Fifth Circuit's ruling has the potential to put the
CFPB's work to protect servicemembers at risk. While that
ruling only applied to the CFPB's payday lending rule, some
entities are attempting to use that ruling to try to escape
legal liability. For example, citing the Fifth Circuit's
ruling, lenders FirstCash and Cash America West filed a
motion seeking to dismiss the case and prevent the CFPB from
obtaining relief for harmed servicemembers, and the case is
stayed while CFSA is before the Supreme Court. Several other
defendants, both within and outside the Fifth Circuit, have
also sought to dismiss or delay CFPB enforcement actions
based on the Fifth Circuit's ruling.
I am gravely concerned that this trend could impact
companies' compliance with the Military Lending Act and the
Federal consumer financial laws that protect servicemembers
and their families. The impact would be dire--effectively
stripping servicemembers and their families of legal
protections that are critical to maintaining military
readiness and preventing involuntary separations, goals which
the Department of Defense reaffirmed when finalizing the 2015
regulations implementing the MLA. In the Fifth Circuit alone,
which covers Texas, Louisiana and Mississippi, this could
affect 300,000 servicemembers and their families.
The CFPB shares your commitment to protecting
servicemembers in the consumer financial marketplace, and I
appreciate your efforts to ensure that military financial
protections such as the MLA are being implemented as Congress
intended. Thank you for your attention to this important
issue.
Should you have any additional questions, please do not
hesitate to contact me or have your staff contact Janel
Fitzhugh in the CFPB's Office of Legislative Affairs.
Sincerely,
Rohit Chopra,
Director.
Mr. REED. Mr. President, the Military Officers Association of America
and a dozen veterans organizations have validated the CFPB's strong
track record. In their words:
All told, the CFPB has become an indispensable agency for
protecting the legal rights and financial readiness of
servicemembers, veterans, and their families. The stability
of the CFPB's funding is therefore vital to the tremendous
work it does on [their] behalf.
Finally, let me add that it is not just average Americans who will be
put at risk. Responsible lenders will lose the protections of the
regulatory safe harbors created by the CFPB. These rules essentially
protect the industry against the risk of enforcement, so long as they
play by the rules and provide standardized disclosures in plain
English. Those responsible actors in our financial system, who extend
credit on fair terms and deal honestly with their customers, have a lot
to lose.
It all adds up to this: The Fifth Circuit's decision prioritizes the
interests of predatory lenders over responsible lenders, relies on
falsehoods over facts, and chooses chaos over stability. That is
certainly not what any court should be doing.
I hope sincerely that the Supreme Court reverses the Fifth Circuit's
dangerous decision. I hope it recognizes that this is not about
expensive lawyers and trade associations and big businesses. This is
about Americans, many of them wearing the uniform of our country. They
deserve the sympathy and the support of the Court.
I yield the floor.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The senior assistant legislative clerk proceeded to call the roll.
Mr. REED. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
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