Editorial: Consumer protection agency proves its worth

• AmEx agreed to refund $85 million to a quarter million customers.
• Deal is the third won by Consumer Financial Protection Bureau.
• Members of Congress allied with the banking industry want to make it 'accountable.'

When consumers got a solicitation from American Express for its Blue Sky credit card, they figured if they signed up and met the requirements, they'd get $300. That's what the letter promised, prominently promoting a "$300 Bonus Offer." People signed up for Blue Sky, but the bonus money vanished into thin air.

Until recently, such deception wouldn't have gotten a peep out of Washington regulators. But there's a new sheriff in town: the Consumer Financial Protection Bureau. Last week, in a deal the CFPB brokered, American Express agreed to refund $85 million to a quarter million customers who had been fooled by the Blue Sky offer or harmed by other allegedly deceptive or unlawful practices.

The AmEx deal is the third in a string of recent settlements with credit card issuers that illustrate why the bureau was needed — and why it remains a favorite target of bankers and their allies in Congress, who continue trying to defang it. When American Banker, the industry's bible, proclaimed last week: "Why the CFPB's AmEx fine should scare bankers," the publication was spot on. Bankers are on notice that the bureau is on the lookout for a broad range of misleading practices by the once-untouchable industry.

Remember when credit card issuers could raise interest rates at any time for any reason? Or when misleading come-ons and gargantuan late fees were the norm? A gaggle of regulators supposedly oversaw the banks, but they were uninterested in or hostile to consumer concerns. The industry kept Congress at bay with huge campaign contributions.

After the financial meltdown, though, Congress cracked down on unconscionable credit card practices and created an agency that for the first time would look at issues from a consumer perspective. Now in its first full year of operation, the bureau is coming into its own.

In the weeks before the AmEx settlement, Discover and Capital One agreed to pay fines and refunds for allegedly using deceptive tactics to sell customers expensive payment "protection" products of dubious value.

Discover will refund $200 million and Capital One $150 million. All told, the $536.5 million in payouts and penalties are numbers that get banks' attention and deter others from using similar tactics.

The first hint of trouble at AmEx was spotted in routine audits by state regulators in Utah, home to AmEx's banking arm, and the Federal Deposit Insurance Corp. They joined with the consumer bureau to follow the threads — a cooperative model that brings Washington's full weight down on institutions that flout the law. It's a fair bet, though, that without the consumer bureau, it never would have happened.

Members of Congress allied with the banking industry, primarily Republicans, say they want to restructure the bureau to make it more "accountable" and replace its single director with a five-member commission. The goal is to hobble the agency by appointing industry-friendly commissioners, a familiar Washington tactic.

The banks and their congressional backers are betting that the public's memory will be too short to recall past abuses. But it's tough to see any legitimate reason to take such an effective new cop off the beat.