The CFPB is dropping the ball on the coronavirus crisis

Former Consumer Financial Protection Bureau (CFPB) Director Rich Cordray warned that the agency is not doing enough to protect consumers amid the coronavirus pandemic.

“The CFPB has been misreading the current crisis,” Cordray said during a virtual panel hosted by U.S. PIRG on Wednesday. “This is not a time to see this as businesses need help, we need to ease off on businesses and let them have a lot of leeway … if those businesses are consumer finance companies — if the bank, if they are mortgage lenders, mortgage servicers, if there are debt collectors and credit reporting companies — if you ease off of them and don’t make them do their jobs, consumers will bear the brunt of that.”

A woman who lost her job waits in line to file for unemployment following an outbreak of the coronavirus disease (COVID-19), at an Arkansas Workforce Center in Fort Smith, Arkansas, U.S. April 6, 2020. (Photo: REUTERS/Nick Oxford)

‘Cop on the beat’

The CFPB, created in response to then 2008 financial crisis, was a brainchild of Senator Elizabeth Warren (D-MA). Cordray was its first director, appointed by former President Barack Obama, and he resigned in November 2017.

The purpose of the agency and its director was to act as a “cop on the beat to aggressively enforce laws that protect consumers,” Warren explained, in a confirmation hearing for Cordray’s successor, Kathy Kranginer.

U.S. Senator Elizabeth Warren (D-MA) talks with former U.S. Consumer Financial Protection Bureau Director Richard Cordray (R) in 2014. (Photo: REUTERS/Jonathan Ernst)

Cordray warned that in an absence of the CFPB’s aggressive actions, bad actors could emerge.

“Consumers will be harassed by debt collectors, consumers won’t have credit reports that are inaccurate, that don’t reflect the true creditworthiness,” he explained. “And the most immediate to me [is] if mortgage servicers are allowed to have leeway and they don’t answer the calls, they don’t follow through… and people won’t get the relief on their mortgages. They will fall into foreclosure they will lose their house.” 

Hence, with 22 million Americans unemployed and facing financial hardship, “we really need to step up and the Consumer Bureau needs to be what it’s supposed to be: the Consumer Financial Protection Bureau,” Cordray stressed.

An unprecedented number of Americans filed for unemployment in recent weeks. (David Foster/Yahoo finance)

Protecting consumers

In a recent letter to CFPB Director Kraninger, Cordray and his former colleagues spelled out specific actions the bureau could take, from monitoring and issuing guidance for debt collectors, to making sure those who miss rent payments get proper relief and avoid eviction.

He also suggested the CFPB press companies to waive overdraft fees or late fees, and providing forbearance on loan payments.

Cordray did, however, concede that the CFPB was not sitting on its hands in one area. The bureau recently announced that it was going to work with the Federal Housing Finance Agency to share the CFPB’s complaint database, as well as for the FHFA to share servicing information about “forbearance, modifications and other loss mitigation initiatives undertaken by Fannie Mae and Freddie Mac.”

“I’m encouraged by that,” Corday stated. “That’s the kind of direction we need to go. We also need action steps, we need enforcement, we need vigorous oversight — but sharing information is the first step. Because it helps you diagnose the problem.” 

Aarthi is a writer for Yahoo Finance covering consumer finance. She can be reached at [email protected]. Follow her on Twitter @aarthiswami

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