Business forum: Don't defund Consumer Financial Protection Bureau

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Readers of this newspaper might have wished for a different result in the Super Bowl, but they understand that the game is over. That's not how it works in Congress.

Last year, Congress passed the Dodd-Frank Act, which created a new Consumer Financial Protection Bureau. That bureau, which will officially begin functioning this summer, is intended in part to prevent the kind of lending that led to the Great Recession.

Unfortunately, the House of Representatives has voted to replay last year's game. It has passed a resolution to strip the bureau of much of its funding.

The results could be catastrophic. As the Great Recession demonstrated, bad lending has the capacity to bring down the economy. We need regulators to impose reasonable restraints so that consumers understand the loans they are taking out well enough to know if they can make the payments -- something that did not happen during the run-up in subprime lending.

Leaving the bureau without the funds to do its job also risks sabotaging future consumer protection efforts.

We also need the bureau to stop foreclosures based on robo-signers and other misdeeds, to block end runs around 2009's Credit CARD Act, to insure that credit reports are accurate, to stop abusive debt collection practices and for a host of other reasons.

It's not hard to understand why some might want to defund the bureau. The bureau will have the power to prevent lenders from engaging in unfair, deceptive and abusive practices.

While Congress gave the Federal Reserve the same power in 1994, the Fed -- where consumer protection has been described as a backwater -- did not use that power until 2008, too late to stop the subprime loans that led to the Great Recession. Those who profited from abusive and unfair lending want to have the opportunity to do so again, and they know the bureau will try to block them this time.

The U.S. Chamber of Commerce opposed creating the bureau, but that hasn't stopped it from announcing its "priority recommendations" for the bureau. Some of these priority recommendations seem designed to keep the bureau from protecting consumers anytime soon.

The chamber's letter is filled with requests for consultation, coordination and careful consideration -- taken together, they amount to a call for gridlock.

Congress was right last year when it created the Consumer Financial Protection Bureau. It owes it to the consumers of America to give that bureau a fair chance to operate. The Senate should make sure that happens.

Jeff Sovern is a professor at St. John's University School of Law in Jamaica, N.Y. and co-coordinator of the Consumer Law and Policy Blog.


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