There’s A New Consumer Sheriff In California
There’s a new agency in California that promises to “protect consumers, support honest businesses, and advance affordability for Californians.” If Vegas were to give odds, they would be heavily against any of those ever occurring.
It’s called the California Business and Consumer Services Agency, and it’s a cabinet-level department headed by Rohit Chopra, who was sworn in on July 1. It already has a bureaucratic acronym: BCSA. Catchy, isn’t it?
Chopra promises his office “will sharpen and accelerate work to promote economic growth and protect the public from abuses.”
Let us translate that from California-government-speak. What it really means is he will bully companies in a state that already is losing businesses at an alarming rate.
What is Chopra’s qualification for the job? He previously headed the federal Consumer Financial Protection Bureau. If that doesn’t ring a bell, maybe this will: It was the wholly unnecessary and unconstitutional bureaucracy dreamed up by Massachusetts Democratic Sen. Elizabeth Warren almost two decades ago.
The CFPB, an independent bureau within the Federal Reserve Bank, has much the same mission as California’s Business and Consumer Services Agency has been given. CFPB’s duty is to implement and enforce “federal consumer financial law” while ensuring “that markets for consumer financial products are transparent, fair, and competitive.”
But it goes beyond that benign-sounding purpose. As author and investigative journalist Paul Sperry argues, the CFPB was granted sweeping, autocratic authority “to determine the ‘fairness’ of virtually every financial transaction in America.”
CFPB backers claim the agency has a record to be proud of. But those affected disagree. For instance, bankers, whose institutions are already under the thumb of other regulating agencies, complain the CFPB “has too much power, is too partisan and has abused its regulatory authority,” says Sperry.
Chopra was fired last year by President Donald Trump, who has tried to shut down the CFPB. But he still left his mark after heading the agency for four years under President Biden.
Under Chopra, the CFPB “pursued novel efforts to extend its jurisdiction” It has a history of abusive behavior toward private-sector actors going back to its founding. Its rules have “tended to be extremely long and complicated, imposing a huge compliance burden on financial institutions — which pass on those costs on to consumers in the form of higher fees or reduced product choices,” according to the Competitive Enterprise Institute.
As is often the case with government solutions, the CFPB created problems it was supposed to be solving. And it seemed to never tire of tormenting Americans for their own good.
For instance, in the last days of the Biden administration, the CFPB granted itself unprecedented authority to regulate checking accounts. Banks were given two choices: they could cap overdraft fees at $5, one-seventh of the $35 average, or they could consider the overdraft to be a credit.
The rule indulges customers who spend money that isn’t theirs while those who bank responsibly pay the penalty. And the costs are passed on to all customers.
The CFPB has also gone hard after small-dollar lenders. It proposed “such onerous restrictions” on them that it threatened a “lifeline for tens of millions of American families every year who rely on them to buy groceries, to put gas in the tank, or to pay the rent.”
Hester Peirce, a commissioner on the Securities and Exchange Commission, says that “business as usual” at the CFPB “means compromising customer privacy,” as it “collects a lot of information from consumers,” while “ignoring the legal boundaries Congress set for the agency.” In at least one instance, the CFPB gamed out “different options for getting around” its statutory limits.
The CFPB was a mistake from the beginning, says Cato Institute scholar Norbert J. Michel, a reality that was obvious to many “even before it abused its power.”
Even so, the CFPB has become a plaything for those who “see the world through the lens of class warfare, as a zero-sum game.” It’s a damaging mindset, deadly to the innovation, dynamic enterprise and economic growth that pushes us all upward.
We bring all this up because Californians will soon get the same treatment, even though it’s already “the most regulated state in the union,” according to the California-based Pacific Research Institute.
With Chopra now heading California’s latest regulatory mistake, you can bet there will be further damage to the former Golden State’s economy, which already on the rocks.
Since Gov. Gavin Newsom took office, 287 major corporations have moved their headquarters out of state. And more are pulling up stakes every day to move to Texas, Arizona, Utah, North Carolina, Colorado, Tennessee, and other states. Anywhere but California.
California voters may think they’ll get more consumer protection, but what they’ll really get is more dangerous, unneeded regulation that will raise their cost of living, limit their choices and hurt their state’s economy.
— Written by the I&I Editorial Board
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