After pause on federal consumer watchdog's work, some Minnesota lawmakers worry about impacts in the state
Many miles away from Washington, the fate of the country's Consumer Financial Protection Bureau took center stage in a Minnesota Senate committee on Thursday.
The CFPB as it's known was born out of the 2008 Great Recession and is designed to protect people from corporate fraud and scams. But now its future could be in jeopardy, after its acting director earlier this month told employees to pause their work as the Trump administration looks to revamp the federal government.
The state senate's commerce panel heard testimony from state officials and residents concerned about how scaling back the watchdog's work or shuttering the bureau altogether would impact consumer protections.
The Minnesota Department of Commerce is an avenue to report complaints, but certain jurisdictions are out of its purview, like federally regulated banking institutions and credit card companies, said Jacqueline Olson, an assistant commissioner of the state agency overseeing its enforcement division.
In those instances, the commerce department refers complaints to the CFPB.
"If that option isn't available, I'm not sure where consumers will go. We can refer things to the [Office of the Comptroller of the Currency] or the [Federal Deposit Insurance Corporation] but that's not a space commerce occupies, so we wouldn't be able to help in that space," she told lawmakers.
Jacob Richter, a senior at the University of Minnesota, shared his concerns about the future of the CFPB because he's both a renter and student loan borrower. He noted how his loan servicer, Mohela, had been scrutinized by the agency in a report, which found paying processing, refund delays and other issues impacting people with loans managed by the company.
"Who is going to protect student loan borrowers like me? We need someone policing this bad behavior and protecting consumers," Richter said. "Without the CFPB, there will be no watchdog ensuring fairness in the rental market and student loan finances."
Sen. Matt Klein, DFL-Mendota Heights, who chairs the Senate Commerce Committee, said Minnesotans submitted 17,000 complaints to the CFPB in the last year.
The legislature recently passed laws protecting people with medical debt and student loans. But some DFL lawmakers warn that the state can only do so much if the CFPB shuts down.
Existing staff dedicated to these issues in the commerce department and attorney general's office is much smaller by comparison.
"We'll certainly do our best. We take it as our mission and our creed to protect Minnesotans, but we are out-resourced in this one," Klein said.
There are other consumer protection resources in the Federal Trade Commission, and within the FDIC that regulates financial institutions. Critics of the CFPB say it is a redundant agency for that reason.
Since the CFPB's launch, it's recovered $20 billion for consumers through reducing loan balances or wiping out debts.
