Category Archive: Consumer Education and Engagement

  1. Wait, What is the CFPB?

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    The Consumer Financial Protection Bureau (CFPB) needs a new marketing department.

    In 2016 alone, the CFPB’s “Consumer Education and Engagement” budget surpassed $42 million, yet most Americans don’t even know enough about the agency to form an opinion about it. In a recent national telephone survey, 81 percent of respondents claimed that they had no opinion of the CFPB because they lacked adequate information. This, despite the fact that the CFPB has penalized U.S. companies to the tune of $11.7 billion. (That’s right: $11 billion!) In a 2014 interview with CFPB Director Richard Cordray, Jon Stewart famously joked about the agency’s low profile: “You are in the consumer bureau of … commerce … and alcohol, tobacco, and firearms.”

    The newest polling suggests that the CFPB’s marketing shtick is falling on deaf ears—if any at all. Even Rohit Chopra, a former CFPB assistant director, admits that the agency doesn’t have “the most effective PR strategy.” This is a red flag given the CFPB’s 2017 budget: The agency plans to spend about $45 million on consumer outreach.

    If the CFPB is doing such wonders—as its staffers are quick to say—then why don’t regular Americans even know it exists?

  2. Annual Report Exposes CFPB Excess

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    If 2016 is any indication, the Consumer Financial Protection Bureau (CFPB) shows no signs of slowing down.

    According to the CFPB’s FY 2016 financial report, the agency has an operating budget of more than $647 million ($1.2 billion in total resources)—a 15 percent increase from 2015. In 2016, $290,340,472 was spent on personnel compensation and benefits (including to former employees). An additional $18,304,826 was spent on travel and transportation of persons—more than $11,107 per employee in one year! In other words, almost half of the CFPB’s operating budget is used for personnel compensation and associated costs.

    Or think of it this way: In 2010, the CFPB had 58 employees. In 2016, the number was 1,648 employees—a 2,741 percent increase in less than a decade!

    This takes a toll on the U.S. economy. The CFPB has collected $524,280,000 in civil penalties from companies and financial institutions through September 2016. It has allocated $320,816,713 of that money to victim compensation, but the rest has been used on consumer education and financial literacy ($28,812,809) and “administrative set-aside” ($4,573,322). Yet the agency has financed only one consumer education/financial literacy program through its Civil Penalty Fund to date: Financial coaching, whereby the CFPB plants “financial coaches” at nonprofits and other organizations around the country. (See the full list of participating organizations here.) One of the participants? The Mississippi Center for Justice, a left-wing advocacy group notoriously critical of the payday loan industry.

    Even worse, the $29 million financial coaching budget only goes toward 60 CFPB-funded coaches around the country. That’s roughly $480,000 per coach! The CFPB is yet to release any performance metrics related to the program.

    Here’s to a more responsible 2017.

  3. CFPB Criticizes Cash Advances, CFPB Employees Use Cash Advances

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    The Consumer Financial Protection Bureau (CFPB) just introduced new regulations governing payday loans—small, short-term loans also referred to as “cash advances.”

    Since its inception in 2011, the CFPB has vilified the payday loan industry. The federal agency often claims that payday loans lead consumers into “debt traps,” as they often carry annual interest rates of more than 300 percent. (This assumes that the customer takes a year to pay off a loan designed for two weeks.) The agency’s ominous message: Stay away from payday loans because they’ll bust your budget down the road.

    Alarmism aside, a recent Inspector General report reveals that CFPB employees don’t practice what they preach when it comes to high interest rates. Analyzing employees’ usage of the agency’s credit card for personal expenses, the Office of the Inspector General found that the most common transaction was a cash advance, whereby employees withdrew cash using their government-issued credit card. The OIG tracked 14 such instances totaling more than $2,700. (And the report just looked at 65 employees.) Obviously, the Inspector General was critical of employees using their CFPB credit card for personal expenses, but it also brings up another issue.

    Paying back a credit card cash advance doesn’t come cheap. In fact, it’s exactly the type of thing the CFPB is trying to regulate out of business. The average interest rate on cash advances hovers around 25 percentalmost 10 percent higher than the interest rate on typical credit card purchases. Those interest rates are on top of another three to five percent fee (with a $10 minimum) just for making the ATM transaction. If you take out $300, for example, it could end up costing you about $25 for that one transaction. On smaller amounts, the interest and fees could be even more expensive than a typical payday loan.

    But this doesn’t stop the CFPB from attacking payday loans, while its employees practice the same habits it criticizes. Can you spell hypocrisy?