With the shutdown of the Consumer Financial Protection Bureau, a lender doesn’t need court to snatch grandma’s house, no matter how long it’s been in the family.
Low-income Mississippi borrowers and seniors on fixed incomes will be the first to feel the rug-snatch with the shutdown of the Consumer Financial Protection Bureau this month.
Mississippi attorneys told BGX the CFPB was the strongest tool in their toolbox to prevent predatory lenders from wrongly nabbing homes and businesses. In states like Mississippi, it was practically the only tool to preserve the family home from financial wrongdoers.
A federal judge ruled last Friday President Trump and Trump appointee Consumer Financial Protection Bureau Director Russell Vought couldn’t terminate CFPB employees without cause last week. However, Vought and the Trump Administration are continuing to try to shut down the bureau. Their effort will have far-reaching consequences, particularly in states like Mississippi, which provide no real consumer protection service of their own. Billionaire Elon Musk proclaimed the shuttering of the 20-year old agency with a snarky “CFPB RIP,” post on his dead-named “Twitter” platform last week.
The Damage The CFPB isn’t the faceless government money sink MAGA purports,. The agency, proposed in 2007 by Sen. Elizabeth Warren in response to the U.S. subprime mortgage meltdown and subsequent worldwide financial crisis under former President George W. Bush, is an independent bureau within the Federal Reserve that intervenes on behalf of U.S. consumers. The agency generally serves people who find themselves prey to the kind of unethical lending practices that caused the worldwide recession, which destroyed billions of dollars for the wealthy and launched years of national unemployment.
“The gravity of this attack on the CFPB cannot be overstated. Financial companies have shown time and time again that they cannot police themselves. The Administration is trying to shut down an agency created by Congress to fix problems that caused over eight million people to lose their jobs and almost four million families to lose their homes during the Great Recession,” said Rich Dubois, executive director of the National Consumer Law Center (NCLC), which works with CFPB to protect U.S. consumers. “The CFPB saves homes, stops fraud that ruins lives, and enforces key laws, winning $21 billion in relief for over 200 million people harmed by credit bureaus, big banks, debt collectors and predatory lenders.”
Mississippi attorneys told BGX the CFPB was the strongest tool in their toolbox to prevent predatory lenders from wrongly nabbing homes and businesses. In states like Mississippi, it was practically the only tool to preserve the family home from financial wrongdoers.
Thanks to anti-consumer leaders, Mississippi is one of roughly 20 states that allows nonjudicial foreclosures. This means if a borrower defaults on a mortgage—through negligence, hardship, or “dirty pool lending”—the lender does not have to go to court to foreclose and snatch grandma’s house, no matter how long it’s been in the family. All the lender has to do is pay a county newspaper or magazine to publish a notice of foreclosure. (These notices generate big money for local publications in a world of declining advertising revenue, so local papers sometimes squabble over the right to publish them.) Grandma’s best recourse is to get a lawyer to call the lender’s lawyer and file a temporary restraining order (TRO) in chancery court while she argues the reasons for her missed payments.
Lenders do occasionally engage in the kind of practice that catches a chancery court judge’s attention. A disreputable lender who believes grandma has outlived the value of her exploitative reverse mortgage may try to push her out of her house by insisting she buy new insurance coverage on her home. The company could then bring in an overpriced third-party insurance provider to carry the new coverage at more than triple the market cost, which of course balloons grandma’s monthly loan charges. This is called “force-placed” insurance.
But while filing her TRO in chancery court, grandma’s attorney may also alert the CFPB of the force-placed insurance scheme, or any other dodgy doings. If enough alerts against the same company pile up at CFPB headquarters, the agency may launch its own investigation and start scrutinizing the company’s history and practices. And no lender wants CFPB hounds sniffing. In 2022, the CFPB whacked Wells Fargo with a $3.7 billion fine for illegal conduct leading to billions of dollars in financial harm to customers and the loss of vehicles and homes. The Consumer Financial Protection Bureau discovered Wells Fargo had illegally assessed fees and interest charges on consumers’ loans, wrongly repossessed their properties, misapplied bank loans and hit consumers with unlawful surprise overdraft fees and other “incorrect charges.”
Other notches in CFPB’s belt included ordering Navy Federal Credit Union to pay more than $95 million over illegal surprise overdraft fees charged to military servicemembers, veterans, and consumers, despite their bank accounts having sufficient funds at the time of purchases. Additionally, many college graduate students may recognize the name “Navient,” and be thankful CFPB banned Navient from servicing their federal student loans. It also slapped the company with a $120 million fine for widespread student lending failures.
The Consumer Financial Protection Bureau is known also for ordering lending company Mr. Cooper to cough up more than $70 million for wrongfully foreclosing on homeowners during reviews and impermissibly raising homeowners’ monthly payments and failing to honor mortgage payment arrangements.
Of course, that was before Trump and DOGE shut the agency down last week, sending howls of joy through lending sector offices. The CFPB must now halt its biggest ongoing investigations, including legal action against Comerica Bank for allegedly harvesting junk fees from 3.4 million Social Security recipients, deliberately disconnecting 24 million customer service calls and mishandling fraud complaints.
Before interruption, agency hounds were also in the middle of imposing a rule preventing data brokers from selling sensitive personal data to scammers and stalkers, and they had just launched a suit against credit bureau Experian for conducting sham investigations of credit report errors and failing to remove or reinserting bogus errors on reports—threatening consumers’ credit scores and access to credit, employment, and housing.
In addition to cutting loose unethical lenders, removing the CFPB could stack chancery court arguments against consumers in places like Mississippi. There is no guarantee a recent favorable settlement for one Mississippi resident against Tower Loan of Mississippi LLC, would have happened without CFPD’s shadow looming over the court. Agency watchdogs are now penned as companies misrepresent closing costs as “$1,924” when, in fact, they are $5,500 and inflate consumer "escrow shortages" by $13,406 without explanation during a national pandemic.
Now thanks to the White House, lenders in unpoliced states like Mississippi have a cleaner horizon with plenty of targets. Grandma, beware.
Comments