Most of us remember the financial crisis of 2008 when ongoing concerns about how things were proceeding with the housing market were finally realized. Lehman Brothers was allowed to fail and the stock market responded in dramatic fashion.
In the wake of the financial crisis, it became clear there were many causes of it. Part of the problem, though, was that many Americans didn’t fully understand the consequences of their financial choices. Contracts were often so filled with jargon and legalese that it was hard for borrowers to know what they were really agreeing to. Plus, there’s evidence that unethical behaviors in the financial services industry contributed as well.
Enter the Consumer Financial Protection Bureau
To help combat predatory practices that hurt consumers, the Consumer Financial Protection Bureau (CFPB) was created in 2010 as part of the Dodd-Frank Act. The CFPB was given unprecedented power to look into alleged abuses by those in the financial services industry. Since then, the agency has issued new rules, enforced existing rules, and even handed down fines.
But now the CFPB is under fire. A recent court ruling and continued criticism from conservatives in Congress might change the way the agency operates going forward. If you work wit a difficult student loan servicer, have been caught in the cycle of payday loans, or worry about being scammed by a shady organization, changes to the CFPB could have consequences to your wallet.
Does the CFPB have too much power?
While the Constitutionality of the CFPB isn’t a subject of debate, the way the agency is structured has become a sticking point. On October 11, 2016, a circuit court in Washington, D.C. issued a decision that calls the structure of the agency unconstitutional because there is too much “unilateral power” given to the director of the CFPB.
The CFPB was set up to be as independent of political influence (and backlash) as possible; it is not directly subject to oversight from other government branches. Even though the president appoints the director of the CFPB, and the Senate confirms him or her, other oversight isn’t provided by Congress, the Courts, or the Executive branch.
In fact, funding for the CFPB isn’t even subject to Congress. Instead, the agency gets its money from the Federal Reserve.
The ruling earlier this month says that the director of the CFPB has too much power and things need to change. However, supporters of the agency point out that the Federal Reserve is similarly independent and there is already adequate oversight for the CFPB.
The actions of the CFPB are subject to veto by the Financial Stability Oversight Council, which is an arm of the Treasury Department. Plus, before making a ruling, the CFPB observes a long public notice and comment period.
These realities, insist supporters, provide enough oversight that the CFPB can’t do too much, while still providing enough independence that the agency can continue its important work of advocating for consumers.
Detractors, on the other hand, want to see the CFPB shut down and even Dodd-Frank invalidated, while a new plan is made to protect consumers. Moves to restrict the CFPB’s budget have already been taken and some conservative think tanks, such as the Heritage Foundation, would like to see the agency completely dismantled.
What has the CFPB done for me lately?
So far, the CFPB has been rather active in cracking down on practices it considers predatory. Recently, the agency levied a $100 million fine against Wells Fargo for its account-opening practices. The CFPB has also levied fines against debt-relief companies for charging fees the CFPB considers illegal. Additionally, it has issued rules that require mortgage lenders to verify the ability of borrowers to repay their loans.
In terms of student loans, the CFPB has been working to protect consumers. The agency put a stop to a student loan debt relief scam, and is investigating the practices of student loan servicers. The CFPB has taken a number of steps to try to protect student loan borrowers, create more transparency in the repayment process, and hold servicers accountable for practices that put borrowers at a disadvantage.
The loss of the agency could be a blow to some of the transparency achieved in the last few years. Additionally, some of the protections that student loan borrowers have received recently could disappear.
While the court ruling doesn’t immediately mean it’s the end of the CFPB (don’t forget about the appeals process), there could be changes ahead. Creating a situation where the agency is subject to political pressure and retribution could affect how aggressive the CFPB is in protecting consumers and going after predatory practices.
What are the chances the CFPB disappears completely?
For now, the best protection the CFPB has is in its popularity. According to a recent poll, 71 percent of voters approve of the Consumer Financial Protection Bureau after hearing a description of its purpose. After hearing for-and-against arguments related to the CFPB, 79 percent of Democrats, 67 percent of Republicans, and 63 percent of Independents take a positive view of the agency.
As a result, if voters continue to see the agency in a positive light, it is unlikely to disappear altogether. However, the effectiveness of the CFPB could change significantly if voters aren’t paying attention and demand that their representatives commit to strong consumer financial protection.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.57% – 6.97%1||Undergrad & Graduate|
|2.47% – 6.99%3||Undergrad & Graduate|
|2.68% – 8.77%4||Undergrad & Graduate|
|3.24% – 6.66%2||Undergrad & Graduate|
|2.61% – 7.35%5||Undergrad & Graduate|
|3.01% – 9.75%6||Undergrad & Graduate|