Critics say proposals may curb access to credit. Let’s hope so.

The Consumer Financial Protection Bureau has detractors.

The Republican Party platform calls the CFPB a “rogue agency” with a “one-size-fits-all approach” that “threatens the diversity of the country’s financial system.” Other critics say its enforcement actions and penalties limit people’s access to certain forms of credit.

Opponents are right on the last point. The CFPB is working on rules that could curb access to money for many borrowers. It is focusing on three key areas: arbitration clauses, payday lending and debt collection.

Arbitration clauses: Congress told CFPB to study the use of mandatory arbitration in consumer financial markets. In May, the CFPB proposed rules that would prohibit these clauses. Consumers are constantly signing away their rights to sue as a class, thanks to clauses buried in service or product agreements requiring dispute arbitration. “Tort reform” activists hate that CFPB is going after arbitration, claiming plaintiff lawyers will end up the winners and consumers will pay more for credit products.

I’m not a big fan of class-action lawsuits because individual consumers rarely get substantial compensation. The judgments sound impressive, but when you subtract attorney fees and divide the awards among hundreds of thousands — or millions — of consumers, the payoff for individuals is pitiful. But the lawsuits can curtail bad business practices.

Payday and auto title loans: In June, the agency proposed limits on the small loans made to folks who often can’t pay as promised with their next paycheck. The rules would include auto title loans, which involve people putting up their vehicles as loan collateral.

When people can’t pay off these loans, they often end up borrowing again, creating a cycle of payday loan dependency. One report by the CFPB found that about one in five borrowers who took out an auto title loan had their car or truck seized.

With these types of loans, lenders don’t look at ability to pay. Borrowers just need to have a job or title to the auto. Under the proposed rules, lenders would have to determine if a consumer could afford the loan when taking into account basic living expenses and major financial obligations. And there would also be a limit on the number of short-term loans people could take out in a row.

Debt collection: In July, the agency said it was considering rules to make sure debt collectors are collecting from the right people. Often when companies buy debt, there are few details in the consumer’s file. The new rules could require debt collection companies to verify that a debt was owed before contacting consumers.

Collectors couldn’t hound people. They’d be limited to six attempts at reaching a debtor per week.

The proposed rules will burden the industry, opponents say. Legitimate collection efforts will be harder and the result will be less available credit and higher costs for that borrowed money.

Credit is an important economic driver. But borrowing has become an albatross for a lot of people — who want a credit card so bad that they don’t care if their legal rights are restrained.

These people find themselves in such a financial bind that they sink them further into deb, loan after loan.

That’s why the CFPB has to ignore challengers whose intentions are biased in favor of doing business as usual.

Boilerplate arbitration clauses prevent many consumers from participating in class-action lawsuits, which can force companies to change bad behavior. Payday lenders prey on people with financial challenges or poor money management. And unethical debt collectors are violating the spirit and intent of the Fair Debt Collection Practices Act.

The proposed rules could very well result in limiting consumer choices. And, in many cases, that is exactly what should happen. Some people need protection from bad financial practices, and frankly, their own bad decisions.

— Washington Post Writers Group

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