Is the Consumer Financial Protection Bureau Good For Your Business?
The Consumer Financial Protection Bureau matters.
It matters not just to your customers, who would benefit from the proposed agency's oversight of financial services and the resulting improvements in customer service.
It matters to your business, too.
But the CFPB is in trouble, specifically the Obama administration's nominee to head the agency, Elizabeth Warren. She's a Harvard Law professor who is already an icon among liberals, activists, and consumer advocates. (I count myself among her fans, of course.)
Yesterday's House oversight committee hearings shows just how deeply controversial Warren and the CFPB have become. The hearing reportedly devolved into name-calling, with accusations and counter-accusations flying.
Conservatives believe the CFPB lacks sufficient oversight. Rep. Patrick McHenry (R-NC), who chairs a subcomittee on financial services, outlined his party's objections:
Once fully operational, the bureau will possess virtually unchecked discretion to identify financial products and services that the director determines to be 'unfair, deceptive, or abusive. [We are] are skeptical that the bureau's creation, structure and broad discretionary powers are warranted.But consumer groups say more rules could water down the agency and render it ineffective. Consumers Union believes additional oversight could turn a watchdog into a lapdog.
"Consumers deserve a watchdog that can take on shady loans, hidden bank fees, and the latest financial scams," said Pamela Banks of Consumers Union. "It's time for Congress to let the CFPB do its job and stop putting the interests of the big banks and Wall Street over consumers."
I'm hopelessly biased, since I spend a good deal of my own time advocating for consumers. No surprise there.
But here's why you should care about having a strong CFPB with a credible leader. It's the same reason you set up your business in a low-crime area where people feel safe.
Customers scare easily. You could have the best company, but if it's in a questionable neighborhood where cars get broken into and pedestrians are frequently mugged, it doesn't matter. You'll fail.
Similarly, if consumer believe that behind every corner, there's a potentially shoddy financial product that could cost them their life savings, they'll be far less likely to do business with you.
True, the CFPB has a limited jurisdiction. It was originally envisioned as an agency that could regulate a broader array of consumer products, but is now limited to mortgages, credit cards and other financial services. But these issues touch almost every business in some way, whether you accept plastic or offer loans.
In other words, every business in America has at least a small stake in seeing an effective federal consumer agency succeed.
Will the oversight committee turn a watchdog into a lapdog, as Consumers Union predicts? I hope not. All of us -- consumers and businesses -- would suffer as a result.
Christopher Elliott is a consumer advocate, syndicated columnist and curator of the On Your Side wiki. He also covers customer service for the Mint.com blog. You can follow Elliott on Twitter, Facebook or his personal blog, Elliott.org or email him directly.
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