A Republican refrain these last few years has been that the Obama administration went too far in policing Wall Street, resulting in higher costs and less choice for American households. So in February, when President Donald Trump directed his administration to apply a lighter touch, the first move he laid out was a desire to empower consumers instead of regulators so that they could make informed choices when it comes to financial products and services.
On Monday, however, the Trump administration sided with Republicans in the House of Representatives who are seeking to eliminate a key source of information for Americans as part of a broad attempt to roll back post-financial crisis reforms. Department of the Treasury formally recommended that Congress and the White House stop public access to a database that collects consumer complaints about financial companies, tracks responses, and records whether consumers end up satisfied. The Treasury Department said the information should be available only to government authorities.
The proposal, if passed by Congress, “could create a bigger incentive for companies to take advantage of people,” said Pamela Foohey, an associate professor at Indiana University Maurer School of Law.
Molly Meiners, a Treasury Department spokeswoman, pointed to recommendations in the report as being consistent with the administration’s core principle of empowering Americans to make informed choices. She added that the public list effectively placed the government’s imprimatur on unsubstantiated claims.
Created by the federal Consumer Financial Protection Bureau as a follow-up to the 2010 Dodd-Frank Act, the complaint database includes more than 1.1 million reports filed by consumers across the country alleging wrongdoing by debt collectors, mortgage lenders, student loan specialists, and other financial companies. Consumer advocates say the repository has had a big impact on the financial industry, in part because companies know the feds track whether and how quickly they respond to aggrieved consumers, regularly resulting in refunds and reforms of suspect business practices.
But it also ranks among the financial industry’s top grievances about post-financial crisis reforms. Posted allegations aren’t investigated for accuracy, and regulators don’t clarify whether they reflect claims of wrongdoing or gripes about otherwise legal conduct. The government also regularly releases lists of the most complained-about businesses.
“It subjects companies to unwarranted reputational risk,” the Treasury Department said in its report to the White House. Meiners, the Treasury spokeswoman, said the administration wants to seal up the database because it’s “putting a government seal on an unverified complaint list.”
But to Foohey, the database represents one of the few easy ways consumers can hold companies to account for mistreating them. For starters, unlike filing a lawsuit, it’s free to complain to the CFPB. But more important, it sends a message to households that government authorities care about what they have to say, she said. That in turn helps consumers believe that government is fair and working for them.
“Consumers feel powerless,” Foohey said, citing research that found consumers typically don’t seek legal remedies when they’re treated illegally. The CFPB database, she said, “gives people a way to do something about their problems when they may not have done anything.”Some say however that this proposed change is unlikely to become law. Analysts at Washington-based Compass Point Research & Trading said it was “highly unlikely” that Treasury’s proposal would be enacted.—With assistance from Saleha Mohsin in Washington.
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