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For more than two months, the Consumer Financial Protection Bureau -- a centerpiece of the 2010 Wall Street Reform and Consumer Protection Act -- has been up and running. It's the nation's first federal financial regulator with the singular duty of protecting consumers -- including, specifically, members of the armed services -- from unfair financial practices.
So why did Holly Petraeus, who runs the bureau's Office of Servicemember Affairs, recently write in The New York Times that servicemembers and veterans are still being "exploited by unscrupulous for-profit colleges?"
The schools, which use high-pressure sales tactics to recruit students and load them up with high-cost debt to pay for dubious educational programs, are supposed to be regulated by the CFPB. So are payday lenders, mortgage companies and other "nonbanks," as well as banks. But the CFPB doesn't gain its full authority to protect consumers until a director is confirmed by the U.S. Senate.
Unfortunately, at the behest of Wall Street, 44 Republican senators, including Pennsylvania Sen. Pat Toomey, wrote to President Barack Obama in May and told him that they would block confirmation of any director unless the CFPB is first torn down and rebuilt the way the big banks want it -- weak and powerless and with a tin cup in hand. Worse, Mr. Toomey also is a co-sponsor of S. 746, a bill that seeks to repeal the entire Wall Street Reform and Consumer Protection Act.
The threat is real. The House has already passed legislation to weaken the CFPB.
Why would anyone want to leave consumers, especially members of our military, in harm's way?
Servicemembers and veterans have long been targeted by private student lenders, payday lenders, rent-to-own-stores, auto-title/pawn shops and others of their ilk. Numerous commanders have testified that bad credit has harmed security clearances, military morale and unit preparedness. Earlier this year, JP Morgan Chase Bank apologized and paid civil penalties for illegal foreclosures on servicemembers.
Ms. Petraeus, a consumer expert and wife of the CIA director, Gen. David Petraeus, is the CFPB's voice for military families in the financial marketplace, but until the CFPB gets a director, she cannot do much to protect them unless they are cheated by a big bank.
On July 18, the president nominated former Ohio Attorney General Richard Cordray, the CFPB enforcement chief, as the bureau's first director. On Sept. 6, the Senate Banking Committee held his nomination hearing and is expected to vote on his nomination today. Sen. Toomey sits on the Banking Committee.
Mr. Cordray has received strong support from Ohio newspapers and praise from the current Republican attorney general of Ohio, former U.S. Sen. Mike DeWine, who had defeated him. Even many Ohio bankers have commended his nomination.
The failure of current bank regulators to stop predatory lending and other reckless Wall Street practices is widely recognized as the primary cause of the 2008 mortgage meltdown that caused the loss of millions of homes, millions of jobs and trillions of dollars in lost retirement income, triggering the Great Recession.
In response, Congress established the CFPB as part of the 2010 Wall Street Reform and Consumer Protection Act. Many consumer advocates and experts consider it the most significant consumer financial protection measure since federal deposit insurance was created after the 1929 stock market crash.
The bureau's mission is to use research, regulation, education and enforcement to protect all consumers in the financial marketplace. Congress gave the CFPB special responsibilities to protect older Americans, servicemembers and students.
Unfortunately, some policymakers don't want the CFPB to do its job because it might sometimes annoy or rein in the financial industry. That leaves military families, veterans and the rest of us at the mercy of unscrupulous lenders.
Alana Miller is a program associate for PennPIRG ( firstname.lastname@example.org ).
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