Recently, with the transformation of the Trump administration, important consumer protection bodies face radical dismantling. Senator Tim Scott (R-SC), who is now charged with overseeing these financial regulators, has collected millions from banking and financial sectors. They have happily defended the rights of these bodies to impose so-called ‘junk fees’. Scott has even presented a resolution permitting banks to levy high overdraft fees on their customers again.
The wealthy benefactors from financial institutions have filled Scott’s campaign coffers to the tune of $5.3 million since 2009. While defending the right of the banking industry to vacuum out the wallets of consumers, he received nearly a million dollars from financial executives alone.
As the newly appointed head of the Senate Committee on Banking, Housing, and Urban Affairs, Scott is now the puppeteer pulling the strings of federal banking and key financial regulatory agencies, such as the Federal Deposit Insurance Corporation, the Securities and Exchange Commission (SEC), and the Consumer Financial Protection Bureau (CFPB). It’s rather shameful that he plans to slash CFPB’s funding under some false pretence of tax cuts for wealthy corporations.
Another one of Scott’s plans is to reduce regulations on credit lending and play into the hands of cryptocurrencies and fintech platforms, thereby deepening their reign within traditional banking systems. This was evident when Scott, along with Rep. French Hill (R-AR), put forth a resolution intending to overturn a CFPB rule that capped most bank overdraft charges at $5.
Before this crucial rule was enforced, overdraft fees provided a steady revenue stream for the banks, raking in billions each year. Given these circumstances, Scott had the audacity to defend the practices of these financial institutions and branded the CFPB’s attempt at overdraft reform as a ‘smear campaign’ against respectable banks.
Many financial experts argue that these overdraft fees are an unnecessary, exploitative tactic designed by the banks to maximise profit off the average consumer. In 2021, it was found that consumers were paying an average of $35 in penalties for account overdrafts, a revenue stream earning banks billions each year.
Then came Scott Bessent, the Treasury Secretary, who ordered the CFPB staff to hold off nearly all their operations, including the essential task of overseeing financial institutions. One day later, Bessent told all the bureau employees to stay home because their headquarters would be closed for an inexplicable week.
To add to the charade, only two days after all this, President Trump announced his choice for a permanent CFPB chief: Jonathan McKernan, a former banking regulator known for his opposition towards increased oversight over bank mergers and protections for bank customers.
It’s pertinent to note that the CFPB was established in 2010 following the 2008 financial disaster. Its mandate was to monitor large financial institutions, debt collectors, payday lenders, and mortgage providers to protect consumers from unjust financial practices.
Since its establishment, the bureau has on several occasions demonstrated its value to consumers. They’ve handed back greater than $20 billion to consumers who were victims of financial scams, fraud, and other predatory practices. Their efficacy, however, seems to be seriously undervalued by those controlling the financial institutions.
In one memorable case, the CFPB even ordered a consortium of credit repair companies to return more than $1.8 billion to 4.3 million consumers for committing fraud via illegal fees and deceptive marketing strategies. They have also made a significant stride in curbing ‘junk fees’ levied by banks, besides capping the amount credit card companies can charge for late payments.
Continuing his disdain for consumer protection, Scott is working to scrap the overdraft fee stipulation by employing the Congressional Review Act, which gives Congress the power to undo an agency rule enacted within the last months of a prior president’s administration.
House Republicans recently passed a vote to extend the Congressional Review Act’s reach to include the entire final year of a previous president’s term. This dangerous precedent means even the cap on credit card late fees could vanish if the bill is signed into law, leaving consumers even more vulnerable.
Goldman Sachs, the multinational investment bank, and its employees along with political action committees form the largest contributors to Scott’s political career, contributing in excess of $278,000 since 2009. This sum includes lavish donations by Goldman Sachs executives like John Rogers, David Solomon, and David Philip.
Scott’s campaign coffers have also been filled by hedge fund tycoons like Paul Singer, the CEO and president of Elliott Investment Management, and Daniel Loeb, the CEO of Third Point LLC. With such substantial backing from big banks and financial institutions, Scott’s agenda as the chair of the Senate Banking Committee paints an increasingly grim picture for consumer protection in the financial sector.