The CFPB Gets One Right?

It’s no secret that I’m not a big fan of the Dodd-Frank-created Consumer Financial Protection Bureau (CFPB), mostly because I believe it will not be good for consumers.  So let me acknowledge an instance in which the agency is attempting to do something good.

One thing I dislike more than the CFPB is the practice of many state and local governments to use their “abandoned” property laws to steal the remaining value of a consumer’s gift card.  Here’s how it often works:  Say your favorite aunt gives you an Amazon gift card for your birthday.  Now you don’t know what you want to use it for, so you put it in a drawer in your house.  If you leave it there for more than two years—even considering that it is in your house (that is, in your actual possession)—but you don’t use it, states like Maine consider it “abandoned” and force the merchant (in this case Amazon) who issued it to transfer its outstanding value to the government.  If that’s not theft, I don’t know what is.

The CFPB has issued a notice for comment on whether these laws should be preempted by federal statute.  Now if the CFPB was really doing its job, it would simply cite Article I, Section 10 of the Constitution, which prohibits states from ”impairing the obligation of contracts.” But I suspect that the CFPB doesn’t fundamentally have a problem with states rewriting contracts, at least not when the states claim the rewriting somehow benefits consumers.  Oddly enough in the abandoned gift card instances, however, the states in question are benefiting the merchant. These laws relieve the merchant of his obligation to honor the cards’ promise to the consumer, because the state puts itself in the place of the consumer.

I am withholding final judgment on this CFPB initiative because, after all, this is a notice for comment, not a final rule or preemption. As the CFPB was intentionally structured to be a captive of specific special interests, I worry that once the affected governors and mayors mobilize to protect their ability to steal consumers’ gift cards, the CFPB will fold like a cheap suit.  Here’s hoping the agency gets this one right.