The U.S. House voted Thursday on the so-called Financial CHOICE Act, a bill that would eliminate consumer protections and destroy safeguards put in place to avert financial crises like the one California just survived.
The bill should be called the “Wrong Choice Act,” because – if passed by the Senate and signed by President Trump – it will turn back the clock to 2007, when toxic and manipulative financial products brought down the entire economy.
When our nation was rocked by the Great Recession, California’s San Joaquin Valley was at the center of the damage. Residents in Modesto, Stockton and Merced were losing their homes, jobs and life savings in droves.
Republican Congressmen Jeff Denham of Turlock and David Valadao of Hanford should have opposed this extreme legislation. Unfortunately they sided with predatory lenders instead of American families, voting to to weaken homeowner protections, block action against racial discrimination in auto lending and to prevent consumers from having a day in court. They had a chance to help right these wrongs by opposing this bill but both refused and voted with the majority.
This bill repeats the mistakes of the past. It makes another foreclosure crisis more likely by weakening the common-sense rule that lenders verify borrowers’ ability to repay. It exempts a wide range of mortgages from basic borrower protections and enables lenders to make costlier loans that are harder to repay. Minority borrowers, owners of manufactured homes and poorer residents are especially at risk.
The financial crisis exposed the vast underbelly of predatory lending. The 2010 Dodd-Frank financial reform law created the Consumer Financial Protection Bureau to be the cop on this beat. The bureau has returned approximately $12 billion to 29 million Americans.
But the Republicans’ bill severely curtails or completely strips the bureau’s powers. It wouldn’t be able to secure justice as it did for victims of Wells Fargo’s unauthorized accounts scam, or act against payday, car-title or similar small-dollar loans notorious for triple-digit interest rates and for pulling seniors, service members and other borrowers into a debt trap.
The bureau’s enforcement authority would essentially consist of sending cease-and-desist letters asking banks and credit card companies to play nice. The legislation would let the president fire the bureau’s director for any reason, including for being too tough on politically powerful players on Wall Street. The measure would also put the bureau’s funding at risk, threaten its education and research wings and hide the names of companies in the consumer complaint database, removing a powerful incentive for treating customers fairly.
The bill is a giveaway to payday lenders, debt collectors and bad financial actors. It would expose California families to enormous financial risk.
Now it’s up to the Senate to keep it from becoming law.
Graciela Aponte-Diaz is director of California policy at the nonpartisan Center for Responsible Lending. She can be contacted at Graciela.Aponte@ResponsibleLending.org.