By Orson Aguilar
Do you have a bank account? A credit card? Any dealings with banks or other financial institutions? If so, Congress wants to empower Wall Street to rip you off.
The 2008 crash and Great Recession resulted largely from unethical behavior by lenders and other financial firms. Lenders talked people into signing up for predatory mortgage loans that were literally designed to fail—after the lenders had made a quick buck selling them to investors.
In response, Congress passed the Dodd-Frank financial reform act, establishing significant reforms to prevent the disaster from repeating. While imperfect, the law has done real good. Now, the new Congress and the White House are joining forces to destroy some of its most important reforms.
Earlier this month, the House Financial Services Committee approved the so-called Financial Choice Act, authored by committee Chairman Jeb Hensarling (R-Texas). Powerful bank lobbies like the American Bankers Association lined up behind the biggest effort yet to weaken financial reform.
The bill—dubbed the Wrong Choice Act by opponents—would make it easier for banks to avoid requirements designed to keep our financial system stable. Worse, it would drastically weaken the Consumer Financial Protection Bureau, the first and only federal agency whose sole function is to stop banks and other financial firms from cheating you.
Through its enforcement actions, the bureau has already forced big financial firms to give back billions of dollars to American consumers who were cheated by shady, illegal banking practices. These crackdowns have involved some of Wall Street’s biggest players, from Chase Bank and a group of American Express subsidiaries, to credit reporting firms like Equifax and TransUnion.
The bureau has also moved to curb abuses in payday lending and aggressive debt collection practices. And—particularly important given the shady lending that caused the crash—it created the Ability-to-Repay rule. This requires mortgage lenders to make a good-faith determination about whether someone actually has the ability to repay a loan and prevents the use of teaser rates to hide a loan’s true cost.
The victims of these abuses are often the most vulnerable, including people with low or moderate incomes and communities of color.
Democrats in Congress have vowed to oppose the Financial Choice Act as it now heads to the full House and Senate. The threat of a Senate filibuster could force some changes—especially if the public is alerted to the harm it could do.
While the Financial Choice Act would not kill the Consumer Financial Protection Bureau, it would destroy its independence, putting it under the thumb of politicians who get millions in campaign contributions from the very bankers it regulates.
“It is an enormous package of gifts for Wall Street and the worst actors in finance,” Lisa Donner, executive director of Americans for Financial Reform, told the New York Times.
She’s right. Congress and the White House must hear loudly and clearly that voters don’t want to go back to the bad old days.