News Journal:Despite headlines, regulations protect you every day

Let’s talk about federal regulations.
Argh! Maybe you immediately think of all the extra paperwork your company has to pay for? Or the two years it took to get permission to extend that dock? Or perhaps you have seen one too many instances of TSA stupidity at airports?

Just about everybody can find a reason to dislike one government regulation or another. But try thinking about it this way:

You know immediately when some regulation bothers you. What you cannot know is how many times a day a federal regulation has protected you.

That could change in the next couple of years, as you begin to live with the absence of many of those protections. The anti-regulation zealots who have the upper hand in Washington these days are in the process of gutting our regulatory agencies.

Clean air, clean water, food and drug safety—the list of what will be endangered, by budget cuts and by putting people in charge who actively work against an agency’s mission, is a long one. Will there be more news stories about Flint-like water or e-coli tainted hamburger or Thalidomide-like drug tragedies? I don’t know, but they will certainly be more likely.

For now, having just read a paper entitled “Independent Directors of the Board of Wells Fargo & Company’s Sales Practices Investigation Report” (believe it or not, I like reading original source stuff like this), I’m just plain angry about what can happen without regulation in the financial sector—and how much worse it is likely to get.

Like all such corporate reports, the one produced by Wells Fargo’s independent board members is written in careful, purposely dull legalize. But it does explain exactly what happened at the fourth largest bank in the United States: “The root cause of sales practice failures was the distortion of the Community Bank’s sales culture and performance management system, which, when combined with aggressive sales management, created pressure on employees to sell unwanted or unneeded products to customers and, in some cases, to open unauthorized accounts.”

Translation: Top management put enormous pressure on local branch employees to sell more bank products even if that meant cheating their customers.

When the full extent of the fraud became known (starting with the investigative reporting of the Los Angeles Times), it turned out that millions of fee-producing checking, savings and credit card accounts had been opened in the names of bank customers, without their consent or knowledge. The Consumer Financial Protection Bureau and other regulators fined Wells Fargo $185 million last September, alleging that more than two million of such accounts were opened or applied for between May 2011 and July 2015. The best guesses are that some three and a half million accounts, even including some unauthorized insurance policies, were involved in total.

When the fine was levied, the bank said it had fired some 5,300 employees, about one percent of its workforce, charging them with making fraudulent sales. Do the words “fall guys” come to mind? The bank’s CEO and the former head of retail banking, both of whom denied any knowledge of the fraud, managed to retire with multi-million dollar packages, although some of those millions were clawed back, after negative press coverage, by an embarrassed board of directors.

The Consumer Financial Protection Bureau was established in 2011, authorized as part of the Dodd-Frank Wall Street Reform Act, to act as a consumer advocate, protecting them from abuses by banks, security firms, debt collectors and other companies operating in the financial sector. Frankly, perhaps because it was a new agency and went through some growing pains, as well the full plate of issues it immediately dealt with, it was late to the Wells Fargo scandal. But it was the lead agency that finally led the charge against the bank’s abuses. Without the CFPB, the scandal might still be going on or have blown over without any serious repercussions for Wells Fargo, and no message to other financial companies that they had better worry about a new consumer watchdog.

According to Bloomberg News, the agency has provided “$11.4 billion in relief for more than 25 million aggrieved consumers” since its inception. The Wall Street Journal reports, “CFPB has handled more than 930,000 consumer complaints on a range of financial services from mortgages and bank accounts to payday loans and virtual currency.”

Too much regulation? Unnecessary regulation? Not by my standards. The bad news is that the CFPB is probably number one on the endangered list of regulatory agencies that the current administration and Congress want to abolish. If that happens, yet another victory for the powerful banking lobby will mean a lot less protection for consumers.

Ted Kaufman is a former U.S. senator from Delaware.