The convenience of modern-day consumerism

The ease with which Americans can obtain credit and spend our money is a remarkable product of smart technology, commerce and governance.

The vast majority of adults (and quite a few teenagers as well) have one or more credit cards, enabling us to buy stuff anywhere in ways that are generally secure and increasingly frictionless. If our credit record is clean, we can apply for a loan for a home or a car and be approved with a few quick clicks of a lender’s mouse.

It’s true that, for too long, discriminatory barriers kept credit and loans from reaching millions of Americans. For decades, “redlining” practices shut off credit to people who lived in predominantly Black neighborhoods. Until 1974, married women couldn’t obtain their own credit cards. 

Yet even as remnants of these stubborn barriers persist today, the American banking and credit systems work … except when they don’t.

A textbook special interest problem  

Few Americans begrudge a bank or credit card company a profit in return for keeping our money safe, making it easier for us to pay our bills and deposit our checks, and loaning us money when we need it as long as we can pay it back.

Yet far too often, we’ve found ourselves trapped or misled into paying more than we should, sometimes for services we never even asked for. Or we’ve had to reapply for a loan or replace our credit cards, not because we erred, but due to the mistakes that a bank, credit card or credit report company made.

It’s often nickel and dime stuff. But it adds up. Especially for the companies getting away with it. It’s a textbook special interest abuse: the damage done to each individual member of the public is small while the special interest’s gain is great. That’s when a special interest is most likely to escape scrutiny, accountability and reform. 

Unless someone organizes the public.

The stories that follow illustrate what happened when PIRG advocates, organizers and members stood up against financial abuses, large and small. This work led to the creation of the Consumer Financial Protection Bureau, the passage of the Credit CARD Act, and the adoption of free credit freezes nationwide.  

All good reminders that our financial system works best when the public demands it. 

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In the wake of the crash, reform

It was late 2008. Reckless practices on Wall Street, neglected by the government, had brought the economy to its knees.

Home values plunged. Retirement savings evaporated. Americans lost nearly $10 trillion in total. 

PIRG’s Ed Mierzwinski and Gary Kalman pressed for major Wall Street reform. They helped unite consumer advocates, labor groups and others around the goal of protecting consumers from the too-often careless or unscrupulous practices of banks, credit card companies, debt collectors and other financial players. The new coalition, Americans for Financial Reform, was headed by PIRG alumna Heather Booth. 

“This is a David and Goliath fight,” said Heather, in The Los Angeles Times. “On the one side, you have the extraordinarily powerful financial industry and the Chamber of Commerce.... And on the other side, you have the people.”

Elizabeth Warren, then a Harvard professor appointed by President Barack Obama to head the Troubled Asset Relief Program Oversight Board, proposed a solution: the creation of an independent watchdog to check Wall Street. 

Along with AARP and other allies, Ed and Gary met with Professor Warren (whom later, of course, Massachusetts voters elected to the U.S. Senate), Rep. Barney Frank (Mass.) and Sen. Chris Dodd (Conn.) to help turn Warren’s brainchild into the Consumer Financial Protection Bureau.

In December 2009, Rep. Frank introduced the Wall Street Reform and Consumer Protection Act. As Heather Booth predicted, Goliath came out swinging: The financial industry would ultimately spend $500 million in opposition, or roughly 166 times the amount the bill’s supporters would scrape together.

Explore an interactive timeline of our financial protection milestones.

After a special election, a grassroots campaign 

Still, the bill’s prospects looked promising — until Scott Brown, a Wall Street reform skeptic, won a 2010 special election to fill the vacant seat of U.S. Sen. Ted Kennedy, who had passed away in August 2009. 

To persuade Sen. Brown to become a “yes” vote, MASSPIRG launched a grassroots campaign. Ultimately, he agreed to support an amended version of the bill, opening the door to other Republican hold-outs. 

President Obama signed the bill into law on July 21, 2010, and appointed Richard Cordray as the CFPB’s first director in January 2012.

Defending Wall Street’s consumer cop 

By Jan. 1, 2017, the CFPB had provided nearly $12 billion to 29 million consumers in the form of compensation, reductions, canceled debt and other relief. 

Just weeks later, however, the Trump administration launched an effort to weaken the CFPB. 

That same year, PIRG canvassers organized tens of thousands of people to urge their senators to oppose the Financial CHOICE Act, which would have undermined the agency. PIRG advocates coordinated press conferences with local groups and elected officials, defending the bureau in the media.

In 2018, President Donald Trump signed legislation rolling back some Wall Street Reform protections. But the CFPB was spared. As a New York Times columnist had predicted a year earlier, “The [bureau] seems too popular to simply shut down.”

The bureau's popularity was and is due in part to its accessibility, exemplified by its publicly-searchable Consumer Complaint database (a database that PIRG successfully fought to keep public during the Trump administration). PIRG advocates call it the “canary in the coalmine” for threats to consumers. Bureau staffers take consumer complaints on nearly any financial issue online, over the phone or in writing. They then get to work recovering money, eliminating false credit bureau information and debt collection claims and stopping discriminatory practices.

PIRG has played a key role in that process by analyzing the database to find patterns and call attention to pervasive consumer problems. From costly mistakes on credit report to airlines refusing to refund flights during the pandemic, every day Americans are dealing with the same financial frustrations. PIRG’s exposés on how widespread these problems really are has helped drive government officials to find solutions.

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A landmark victory for consumers

On May 22, 2009, PIRG’s Ed Mierzwinski stood beside Rep. Carolyn Maloney (N.Y.) and Sen. Chris Dodd (Conn.) in the White House Rose Garden as President Obama signed the Credit CARD Act into law.

It was a landmark victory for consumers. The new law prohibited a wide range of abusive practices that some banks and credit card companies had been doubling down on year after year after year. Bumping a family’s interest rate to 27.99% even though they had never been late on a payment; charging a $39 fee for being a few hours late paying off a $70 balance — tactics for squeezing more money out of its customers had long ago passed into the realm of the outrageous. In 2009, the Credit CARD Act finally curbed the worst of these abuses — and PIRG helped secure the victory.

A corrupted business model

For decades, credit cards consistently have been the most profitable form of consumer lending for banks and credit unions. In 1999, however, banking deregulation allowed many players in the industry to employ new, more questionable tactics to keep those profits rising ever-higher. As Ed described in a 2013 consumer law hearing in Chicago:

“Credit card companies and their issuers began changing bill due dates, shortening the period between when bills were mailed and when bills were due, saying that payments that arrived after 11:00 a.m. on the due date were late, making bills due on a Sunday and declaring payments that arrived on Monday late — and that was all just to collect more late fees.

“They then began ratcheting up interest rates to as much as 36% APR and applying the new interest retroactively on existing balances. They imposed universal default, saying consumers who’d always paid on time but were late to any other creditor were in default and that their APRs must go up.”

And through it all, the industry’s lobbyists enjoyed significant influence in the halls of power. From 1989 until the run-up to the 2009 Credit CARD Act, Congress held only two hearings, and no votes, on reforming credit card practices. In 2005, Congress passed a bankruptcy reform bill that gave banks even more power over debtors.

Breaking through

Even as the prospects for credit reform were dim, Ed and our consumer team made an impact by providing information, tips and resources directly to the public. For example, U.S. PIRG and U.S. PIRG Education Fund published reports and guides to help consumers lower their credit card APR (annual percentage rate) and avoid predatory credit card solicitations and misleading terms. PIRG’s Christine Lindstrom ran a Truth About Credit campaign on college campuses across the country.  

At the same time, PIRG and other consumer advocates, along with credit reform champions in Congress, kept pushing for legislation to give consumers relief.

In the late 2000s, the dominoes started to fall. First, credit card companies overreached by raising interest rates across the board with no stated reason. Second, the 2008 economic crash made an overdue review of bank and credit industry deregulation all but inevitable.

Enter Rep. Maloney and Sen. Dodd (the latter of whom was also heavily involved in the Dodd-Frank Act that created the Consumer Financial Protection Bureau) and the Credit CARD Act of 2009. The new bill promised strong protections against excessive fees, sudden changes to bill due dates, unannounced interest rate increases, and aggressive solicitations targeting younger consumers. Importantly, it also mandated that if a company does raise its rates, it must lower them if the consumer pays on time for six months.

Ed and the rest of the PIRG consumer team testified before congressional committees, submitted comments to the Federal Reserve on enforcement of the proposed regulations, and earned public attention through media outlets such as PBS Frontline. The campaign team celebrated the bill’s passage on that May day in the Rose Garden.

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‘Your personal information has been compromised’

It was the worst breach of personal data in history. 

In September 2017, Equifax announced that a hack of its records had compromised the most sensitive financial information of nearly 150 million Americans — who suddenly needed to know how to protect themselves against identity theft and credit fraud.

Ed Mierzwinski, Mike Litt and the rest of PIRG’s consumer team published a series of guides to help people address the many “what if” scenarios created by the Equifax breach. For example, the team made an instructional video showing how to freeze your credit report, which, in the event that your identity is stolen or compromised, helps ensure the thief can’t damage your credit score, and in fact blocks them from opening up any new accounts or otherwise accessing your information. (More on credit report freezes later.)

Mike and Ed were also interviewed on Washington Journal to keep viewers up to speed on the best ways to stay safe from scams and identity theft in the wake of the breach.

‘Freeze!’

The scale of the Equifax data breach, which was, according to a congressional investigation, “entirely preventable,” prompted a reckoning on just how little responsibility the credit bureaus were assuming for the sensitive information of millions of Americans — information that consumers hadn’t asked them to collect in the first place.

Consumers and advocacy groups alike were fed up with the idea that a credit bureau’s inadequate security precautions could put you at risk of identity theft and then turn around and charge you a fee for a credit report freeze. Making credit freezes free could make a major and immediate positive impact for the 150 million Americans whose data was compromised by the Equifax breach.

So when U.S. Sens. Elizabeth Warren (Mass.) and Brian Schatz (Hawaii) introduced the Freedom from Equifax Exploitation (FREE) Act in Congress, PIRG rallied public support. We mobilized our members and supporters to send thousands of messages urging Congress to pass the FREE Act, and Ed, Mike and Elise kept a spotlight on the issue in the media.

Meanwhile, years earlier PIRG had teamed with Consumers Union (now known as Consumer Reports) to draft a model credit freeze law. By 2017, most states had passed a version of the law but one that limited free freezes to previous identity theft victims and seniors. MASSPIRG staff, led by Janet Domenitz and Deirdre Cummings, campaigned in support of a bill that would eliminate any fees Massachusetts residents pay to freeze or thaw their credit reports. After months of work with a diverse array of stakeholders, including Attorney General Maura Healey, MASSPIRG celebrated the bill’s passage in the state House in early 2018.

Then, that summer, Congress made credit freezes free for consumers. The provision was included in a set of revisions of the Dodd-Frank Act in 2010 after the Great Recession. 

More reform needed

There are still plenty of problems in the credit reporting industry. The credit bureaus aren’t held fully accountable for their mistakes and misdeeds. Even before a congressional investigation showed the 2017 breach was preventable, NPR reported that three Equifax executives sold nearly $2 million in company stock just days after the breach and weeks before the event was disclosed to the public.

Americans also still find mistakes and inaccuracies on their credit reports every day. These mistakes can have a lasting impact on a consumer’s financial life, including their ability to get a job or buy a home. PIRG has supported comprehensive financial reform, such as the Comprehensive Credit Act, to fix these and other lingering problems in the world of consumer credit and data security.

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