The Consumer Financial Protection Bureau has a new policy that some fear will weaken its policing of Wall Street.
"This is one more step along the path of de-fanging the consumer watchdog," said Christopher Peterson, a senior fellow at the Consumer Federation of America and a law professor at the University of Utah.
The policy, which took effect Jan. 24, imposes a new cost-benefit analysis on the agency stipulating that the harm to consumers caused by a firm's conduct must outweigh the benefits to consumers in order to police that behavior. The CFPB also generally won't seek monetary fines or require financial firms to forfeit ill-gotten gains from abusive practices if they made a "good-faith effort" to follow the rules.
Taken as a whole, the new policy will "gut" many of Dodd-Frank's consumer protections and "will only encourage bad actors to engage in the reckless anti-consumer behavior that led to the financial crisis," said Rep. Maxine Waters, D-Calif., chairwoman of the House Financial Services Committee.Changing the "abusiveness" standard was necessary to reduce uncertainty for financial firms confused by how to approach the new legal standard, according to CFPB officials.
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