The Consumer Finance Protection Bureau (CFPB) was effectively realized in a 2007 essay by a Harvard Law professor, Elizabeth Warren. Warren wondered why consumers were protected by the federal government from the side effects of prescription drugs and flammable laptops but not from wordy contracts and hidden fees. A year later, the idea gained momentum when Barack Obama included the concept for a bureau that would protect consumers from making poor financial decisions in his run for President.
Warren, who was the chic pick for the potential head of the newly formed CFPB until President Obama tapped former Attorney General of Ohio Richard Cordray for the job, contributes the latest economic downturn to a lack of oversight and consumer education. Unfortunately, not everyone is in agreement. Members of the House and Senate (mostly Republicans) have contested the bureau’s scope of powers and lack of accountability, and are threatening to block any nominee for the bureau’s director until these questions are answered.
Over the course of the past two weeks proponents and detractors of the CFPB have testified in front of various Congressional bodies, either lending their support or asking for an overhaul of the founding legislation. As the spotlight has grown on this issue, so has the discussion on the LexBlog Network.
The Hospitality Lawg, a Baker Hostetler production, takes a look at what’s next for the CFPB as the process of nominating a director begins and the bureau’s authority is defined:
“Today, the CFPB goes live with a nominated, but far from confirmed, director. President Obama named Richard Cordray as his choice to lead the Consumer Financial Protection Bureau last Sunday evening. Although we provided some brief insights on the former Ohio attorney general in our January and March CFPB posts, we are fairly certain that more detailed information on the nominee’s positions will be forthcoming. Senate Minority Leader Mitch McConnell (R-KY) made that much clear when he delivered this message to the president from the Senate floor the next day”
In a similar vein on The Corporate Observer, published by Steve Berk, founder of Berk Law, Steve discusses Obama’s decision to nominate Richard Cordray over Elizabeth Warren to head the CFPB:
“Richard Cordray has some big shoes to fill.
Is this former 5-time “Jeopardy!” champion ready to follow rock star Elizabeth Warren as the first director of the Consumer Financial Protection Bureau? Consumers can only wait and hope for the best.”
The Shriver Brief takes a historical look at the ongoing fight over the CFPB, with an interesting article on the founding legislation, the Dodd-Frank Act, consumer protection, and federal preemption.
“Protecting consumers’ rights has traditionally been a state duty and in fact, for most of the nation’s history, consumers have depended on states, not the federal government, for protection. For most of the nearly 150 years since national banks were created, such banks have complied with state consumer protection laws. During the past two decades, however, there has been a major expansion of federal preemption of state consumer protection laws in the banking sector lead by the Office of the Comptroller of Currency (OCC), the main regulator for national banks.
The recent trend began in 1994 when Congress passed the Riegle-Neal Interstate Banking and Branching Efficiency Act, dramatically expanding the scale of banking activities national banks could engage in across state lines. After its passage, the OCC asserted that Riegle-Neal gave national banks the power to export the interest rates of both the state where the bank was headquartered and the state in which a branch was located, allowing banks to take advantage of the most favorable interest rates (known as the “most favored lender doctrine”). The most favored lender doctrine has become one of the hallmarks of federal preemption.”
Shifting back to the present, Nicole Friess, a blogger on the InfoLawGroup’s website, looks at the nitty grity details of what the CFPB must now do as it begins to assume its responsibilities:
“The Dodd-Frank Wall Street Reform and Consumer Financial Protection Act of 2010 shifted the authority to publish FCRA rules and guidelines to the newly createdConsumer Financial Protection Bureau (CFPB). On July 21, 2011,to celebrate the 40th anniversary of the FCRA and aid the CFPB as it takes over interpreting the FCRA, the FTC issued a staff report entitled “Forty Years of Experience with the Fair Credit Reporting Act: An FTC Staff Report and Summary of Interpretations.” The staff report provides important insight into how the CFPB will interpret and enforce the FCRA going forward.
……..
The primary role of the CFPB will be supervision in order to “prevent harm to consumers from unlawful financial practices and ensure that markets for consumer financial products and services are fair, transparent, and competitive.” To accomplish this, CFPB is assembling a team of examiners that will directly observe the business practices of entities subject to CFPB jurisdiction. Examiners will assess institutions’ compliance with the FCRA and other federal consumer protection laws. According to the CFPB website, the agency will require businesses to change their practices to comply with the law and may also “require improved employee training, implementation of better policies and procedures or quality controls, and in more serious cases, monetary compensation to consumers.” “
Last but not least, the folks over at Blank Rome Government Relations’s Financial Reform Watch have been keeping their eyes peeled as the CFPB and Dodd-Frank Act have been under a microscope these past few weeks, so much so that two of their posts deserve special attention. This first post highlights much of the partisan bickering that has been making headlines as of late:
“On July 14, Elizabeth Warren testified before the House Committee on Oversight and Government Affairs in a hearing entitled, “Consumer Financial Protection Efforts: Answers Needed.” Twenty-seven Members of the 40-member committee attended the four-hour hearing and questioned Ms. Warren on issues ranging from her vision for the bureau to its budget and oversight authority.
Throughout the hearing, the committee was visibly polarized. On one side, Republicans, led by Committee Chairman Darrell Issa (R-CA), argued that the bureau needs significantly more Congressional oversight and also needs to do more to preserve personal liberty, giving the American people the ability to make financial choices for themselves, rather than forcing them toward “what’s best for them.” On the other side, Democrats, headed by Ranking Member Elijah Cummings (D-MD) insisted that the CFPB is as accountable as any other financial regulator and said that the issue is a matter of putting consumers’ interests above those of big Wall Street banks.”
and this post breaks down the Dodd-Frank Act by the numbers, a welcome respite for all those that aren’t policy wonks:
“$1,000,000,000,000+ the broader economic costs of Dodd-Frank, according to some estimates.
$19,000,000,000 the size of the bank tax that Sen. Scott Brown (R-MA) successfully removed during the conference process
$2,900,000,000 the cost of Dodd-Frank implementation over the next 5 years
$1,800,000,000 the implementation cost for commodities traders
383,013 words in Dodd-Frank
100,000 non-banking firms that could be regulated by the Consumer Financial Protection Bureau (CFPB)
2,600 new positions at regulatory agencies
2,319 pages in the final bill (vs. 2,409 for health care reform).
533 new regulations
243 rules created by Dodd-Frank (Sarbanes-Oxley created 16)
94 reports
88 hearings held on Dodd-Frank during the Act’s passage and first year of implementation
67 studies required by Dodd-Frank (Sarbanes-Oxley required 6)
44 Republican Senators who have vowed to block any candidate for director of the CFPB
13 new federal government agencies created by Dodd-Frank”
In this reader’s mind, the one thing that is clear from all these posts is that the CFPB is here to stay. While partisan fighting in the House and Senate may remove some of the teeth from the bureau, it’s highly unlikely that the CFPB will disappear from existence without the chance to take a breath. What powers, organization, and funding will the bureau have when all is said and done? Who will lead the CFPB? How much resistance will the White House face from Congress? Those are separate questions.