Consumer finance watchdog that has helped thousands of Minnesotans now faces uncertain future

Jeannie Bowers was shocked when more than $7,700 vanished in March from a joint TCF Bank checking account she held with her daughter.

At first, Bowers said, the bank told her that her daughter had withdrawn the money. But on further investigation, she found that TCF had unilaterally moved it to cover bounced checks and fees for non-sufficient funds in her daughter's individual account.

Bowers wrote complaint letters to both TCF and the Consumer Finance Protection Bureau (CFPB), a federal watchdog created in the wake of the Great Recession to guard consumers from deceptive practices by financial institutions.

A few weeks later, TCF refunded $7,752.45. It declined to comment on the case.

"It was by accident that I found out the money had been transferred," Bowers said. The refund "never, ever would have happened without the Consumer Finance Protection Bureau."

Bowers is one of more than 8,000 consumers in Minnesota who have filed complaints with the bureau since it began operations in 2011, and more than 1,800 of them got some form of relief. But the bureau has also attracted criticism from Republicans, who say it abuses its power and doesn't give financial institutions due process.

Now a fierce debate is underway over whether to restructure the CFPB or perhaps eliminate it.

"American consumers need competitive markets and a cop on the beat to protect them from fraud and deception," House Financial Services Committee Chairman Jeb Hensarling, R-Texas, said at a hearing last month. Instead, the bureau acts as "legislator, prosecutor, judge and jury all rolled into one."

Republican ideas to improve the CFPB include changing its governance and funding, restricting some of its activities or making it easier to challenge them in court, and changing its director into a political appointment instead of an independent overseer.

Republican Rep. Tom Emmer of Minnesota, a member of the Financial Services Committee, said changes are needed to make the bureau's operation more "transparent and accountable."

"The concept is just fine," Emmer said. "The operation has not been meeting the mission in my mind."

A Star Tribune analysis of 731,655 complaints posted on the CFPB website shows that at least one in five consumers obtain some kind of relief, including 7 percent who recover improper fees or other financial restitution.

Wells Fargo drew the most complaints in the state, followed by U.S. Bancorp and Bank of America. No other company attracted more than 500 complaints in Minnesota.

TCF provided financial help to 30 percent of the 284 people who filed complaints against the company in Minnesota, a higher rate than any of the other 25 companies that drew the most complaints in the state, the Star Tribune found.

TCF spokesman Mark Goldman said the bank does not comment on specific customer issues but that it tries to be responsive.

"We follow our own rigorous internal processes to review and address customer complaints and respond in a timely manner, irrespective of whether a customer has submitted a complaint to the CFPB," Goldman said.

In the past six years, more than 1 million consumers have filed an official grievance with the CFPB. In many of those cases, consumers went to the bureau after striking out with a company's customer service department.

Altogether, the bureau has refunded about $11.7 billion to consumers across the U.S., including more than $7 billion in canceled or reduced debts. The agency has returned more than $3 billion to consumers through enforcement actions against companies that have broken laws aimed at protecting consumers.

In Minnesota, the bureau has pursued enforcement cases against 19 of the 25 companies that generated the most complaints, the Star Tribune found.

University of Minnesota law Prof. Prentiss Cox served on the first CFPB advisory board. He said some federal agencies that regulate banks and other financial institutions are actually "adverse to consumer protection."

"Rolling back to the pre-CFPB days would be a disaster for consumers," Cox said. "It would be a willful blindness to catastrophic deficiencies in our prior regulatory system."

Earlier this year, the bureau sued TCF, claiming the bank tricked thousands of customers into paying a $35 service fee to cover each overdraft on their accounts. TCF has denied wrongdoing, saying it informs customers at least 20 times during the enrollment process that the fee is optional. The case is pending.

In 2014, the bureau forced U.S. Bank, another Minnesota company, to provide $48 million in restitution to customers harmed by illegal billing practices. At the time, U.S. Bank apologized to affected customers, noting that the problems occurred with a vendor whose services had been terminated by the company. The company declined to comment further.

One of the agency's most significant cases involved Wells Fargo, a top Minnesota employer, which was fined $100 million in 2016 for illegally — and secretly — creating millions of unauthorized checking and credit card accounts for its customers. Nationwide, more than 52,000 customers have filed individual CFPB complaints against Wells Fargo, more than all but one other company.

"Whether our customers reach out to us directly through our business locations, customer service channels or through third parties [CFPB and/or other regulators], customer feedback is very important to us and we take it seriously," said John Hobot, a Wells Fargo spokesman. "We work with each customer in an effort to find solutions that meet their needs and take into account their individual circumstances."

The bureau "has some serious teeth," said Minnesotan John Lukach, who appealed to the CFPB when he thought the collection firm Navient did not provide legally available repayment options for his education loans. "I don't know of anyone else in the government who will directly intervene on your behalf and who knows who to contact at these big corporations."

Lukach met with the staffs of Minnesota Sens. Amy Klobuchar and Al Franken recently in Washington, asking them to oppose changes.

In an interview, Franken said attacks on the bureau stem from its effectiveness, not its ineptitude. Franken believes that reforms such as removing CFPB's guaranteed funding by the Federal Reserve aim to undermine its independence.

Critics in the financial services industry "don't like it because it is a watchdog and it is doing its job," Franken said.

The most prominent bill that would alter the CFPB, known as the Financial CHOICE Act, passed a House committee earlier this month.

The Financial Services Roundtable, a trade group headed by former Minnesota Gov. Tim Pawlenty, has endorsed changes. "The CFPB plays an important and valuable role on behalf of consumers which could be enhanced by adding a small commission to help ensure key decisions reflect increased consistency, more expertise, and less partisanship over time," Pawlenty said in a statement to the Star Tribune.

But not all companies dislike the oversight. Mark Dixon, chief financial officer of the Minneapolis law firm Messerli & Kramer, said the bureau has helped produce positive outcomes for the firm's collection efforts.

"It requires a little extra time from us, but this is not a huge burden," said Dixon, whose company generated 71 complaints to the CFPB. "It often results in everything getting resolved."

Defenders of the bureau say any changes that would make it less effective will prove unpopular.

"The CFPB is doing a tremendous job helping working and middle-class people," said Democratic Rep. Keith Ellison of Minneapolis. "If you want to vote against the CFPB, you have an ethical responsibility to go to the people you represent and say why, and I say good luck with that."

Jim Spencer • 202-662-7432

Jeffrey Meitrodt • 612-673-4132