American consumers have been protected by the measures that created the Consumer Financial Protection Bureau since 2008. However, a new Supreme Court case, Seila Law LLC v. Consumer Financial Protection Bureau (CFPB), has been touted as a potential force of legal rollback when it comes to these consumer protections. With the consumer credit level reaching $13.86tn dollars in the USA, any major impact on the financial ecosystem will have wide ranging effects on the state of the economy as a whole.
An impact on credit score
The CFPB acts as an arbiter and defender of un-represented people, and often has a hand in rectifying credit score marks that have been seen as unfair. With its removal, there’ll be a looser and more open market for credit, and especially where it impacts on those with poor scores. While some states, including California, are starting to roll out their own credit protection schemes, the onus will shift onto the consumer to ensure they’re doing the right thing. According to Crediful, this will means a greater onus being placed on finding appropriate credit products for those with bad credit where required. On the flip side, it may mean more liberal lending for those who have a better score, or who have taken out higher APR products in order to help build a credit profile.
Looser data – better open banking?
The CFPB not only acts as an authority when it comes to strictly financial matters; it has an impact on data management too. According to Pymnts.com, the CFPB handed out record fines to several student loan companies who had used the unrequited promise of student loan forgiveness to harvest data from potential loan applicants. With this sort of protection rolled back, it may require more savvy habits from credit shoppers to pick out the chaff from the quality products. What it may also do is boost the ability and flexibility of open banking, meaning more interesting and varied financial products from the country’s range of internet banking institutions and startups.
A move away from financial crisis
The CFPB has, according to regulatory opinion mag The Reg Review, been reticent to go after auto loan providers. In their view, this has led to a swathe of sub-prime auto loans springing up, especially when paired with government electric vehicle subsidies. This has been touted as the potential cause of the next financial crash. If the CFPB is rolled back, state powers have been highlighted as a potential way of targeting these loans as and when they are issued. Like California’s new take on the CFPB, they will be interested in flexing their non-federal powers in a way that benefits the voter base directly. Subprime auto loans are likely to be one such way.
The CFPB has been an important defender of consumer rights, but rumblings at the Supreme Court suggest that this will not remain the case. If the agency is rolled back, it will be states that step in. If and when that happens, expect to see a vastly different financial landscape in the USA.