Elizabeth Warren is not a villain

By Frank Schulze

(Olivier Douliery/TNS)
(Olivier Douliery/TNS)

Despite Senator Elizabeth Warren’s insistence that she is not interested in running for president in 2016, she still managed to appear during a prime-time debate. Contrary to the vision of her supporters, however, her televised appearance was during the Republican debate, in the midst of a commercial break.

The political activist group American Action Network spent $500,000 to have a dystopian-themed attack advertisement air seven times during the Nov. 10 Republican presidential debate, per Politico. The narrator never mentions Warren by name, but instead targets what is arguably her most successful legislative achievement, the Consumer Finance Protection Bureau. Warren’s face makes a cameo on a large banner in what appears to be a bizarre attempt at mustering an “evil empress” connotation. In Warren’s Twitter response to the advertisement, she uses the term “Commie Dictator.” This advertisement was dangerously misleading, childishly hyperbolic, and is a poor argument to justify an end to the Bureau.

The advertisement starts in a massive room with unsaturated colors that contains employees systematically denying loans to innocent-looking consumers. Based on the body language and characterization in the ad, the audience is obviously supposed to connect with the consumers, who are depicted as victims of the Bureau. This misrepresentation overlooks the work the Bureau has done to protect consumers in the financial services industry.

The CFPB has broad powers to consolidate regulatory agencies to crack down on predatory lending practices. The need for such an agency was first discussed following the 2008 Great Recession, after negligence on the part of United States financial regulators was understood to be a cause of the crisis. Accountability to the public from the financial industry, another issue brought to light after 2008, is also a pet cause of the Bureau. The CFPB maintains a comprehensive database of over 400,000 complaints from consumers regarding financial products. A company is given 15 days to respond to complaints from consumers, ranging anywhere from unexplained fees, exorbitant interest rates, fraud or misrepresentation. If the company fails to respond, the complaint is made publicly available, and the CFPB encourages the public not to do business with them.

Another populist appeal that the ad makes that is profusely untrue is an ominous declaration by the narrator that “with the Consumer Protection Bureau, those who need help the most are denied.” This may be a reference to the CFPB’s regulation of “payday lenders.” Payday loans are loans a consumer takes out to service short-term needs, like household expenses, but some payday loans (in states where the industry is unregulated) charge interest as high as 391 percent APR. That is inappropriately high.

Those who patronize payday lenders are often low-income households who have poor credit histories and cannot qualify for a loan from a traditional financial institution, like a bank. Payday loans tend to have a two-week term, and borrowers often have trouble paying them back on time, so they essentially take out another one to pay for the initial. The end result is a loan cycle that puts the economically distressed borrower in a pit of debt that can end in bankruptcy. To suggest that by putting a stop to this abuse, the CFPB is “denying help” is ludicrous. While it is important that low-income consumers have access to credit for their daily needs, that is an entirely separate issue, and payday loans are a predatory lending scheme, not a solution.

Circumstances like these in finance are not uncommon. Financial professionals with poor judgment are very capable of exploiting “information asymmetry,” or the corruption of markets that occurs when the seller in a transaction knows far more about their product than the buyer. Finance is a very complex industry, and certain factors, like available leisure time, education and disposable income affect a consumer’s ability to make a smart decision about their money. No one wants to read the fine print when they have a child to pick up, three more errands to run, unpaid utility bills and are presented with a wordy contract that reaches far beyond their tenth grade reading level. Chide the working poor at your own discretion, but this is true desperation. This is true duress.

This advertisement comes at a time when those very “wordy contracts” are under attack. American Action Network strongly supports arbitration, which in plain English is a provision in some legal contracts that, if agreed to, limits a consumer’s ability to sue if they are mistreated by a company. Instead, the two parties settle their disputes with a company mediator, and the results are often unfavorable to the consumer. The CFPB has made many efforts to rein in arbitration clauses because it charges that they are deceptive and unjust.

This explains the foolish attempt of American Action Network to cast the junior senator from Massachusetts as the agent of an Orwellian or Soviet dictatorship, but they are hardly the first to incorrectly dramatize the situation. Last month, the United States Chamber of Commerce compared its fight to topple the CFPB to Han Solo, Luke Skywalker, and Princess Leia’s crusade against the Empire in Star Wars. But in my extensive experience with both finance and Star Wars, there is little similarity between a popular, necessary government watchdog and a planet-razing super laser.

Francis Schulze is a Collegian columnist and can be reached at [email protected]