Pearls of Wisdom: What Liberties Are Being Protected?

Jeb Hensarling (R-TX), the Chairman of the House Financial Services Committee has called the Consumer Financial Protection Bureau’s Director Richard Cordray a “dictator” who is attacking the liberty of American consumers.

Specifically, Hensarling claimed, “When it comes to the well-being and liberty of American consumers, he [Cordray] is not a particularly benevolent one.”

Let’s look into exactly what liberties the CFPB is denying American consumers.

They recently fined Santander $10 million dollars for violating their rules. Santander was charging people fees for advancing money (allowing them to overdraw their checking accounts) without getting permission from their customers.

Let’s say, for example, that you have $20 in your checking account. You use your debit card to get a cup of coffee in the morning for $1, then you spend $5 on lunch, then on your way home you get $25 worth of gas at a gas station – again, all with your debit card.

They are not supposed to authorize the gas station, because you do not have the money in your checking account. Alternatively, if you had signed up for an overdraft service, they would authorize the charge, and then they would reorder the charges:

  • First they would deduct the $25 dollars (making your account $5 overdrawn);
  • and then the $5 for lunch (making your account $10 overdrawn);
  • and then the $1 for coffee (making your account $11 overdrawn).

They do this so they may charge you 3 overdraft fees of $35 each, meaning by the end of this day you owe the bank $116. Some people sign up for these services, but a lot of people would rather have their card declined instead of paying those fees.

Santander hired telemarketers to call their customers. They paid the telemarketers higher hourly fees if they could turn over higher quotas of people signing up for the service. Telemarketers then:

  • Signed consumers up for overdraft service without their consent;
  • Misled consumers about when the fees are actually applied and for what exact amount; and
  • In some cases, told people that they would pay fees regardless of signing up for the service.

The CFPB took away people’s liberty to be charged overdraft fees without their permission. That is a liberty that most Americans would prefer not to have.

Banks (and Santander is one of the largest banks in the world) have government relations staff to explain their concerns about liberty and other subjects to the government. But on the other side, people who overdraw their checking accounts don’t generally show up either in the halls of government, or at campaign fundraising events.

Let’s see which side of this dispute Congress members are concerned about.

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