As the massive 2,000-plus-page regulatory reform bill meanders its way through Congress, the Senate and finally to the desk of President Obama for his signature into law, one thing seems certain ... the new Consumer Financial Protection Bureau (CFPB) will be a component of whatever bill is eventually passed. This new bureau will receive consumer protection powers that will be transferred to it by the Treasury Secretary within six months to a year after bill passage, and can be extended to 18 months if needed. This new bureau, once operational, will have broad authority over an extensive list of consumer protection laws including, the Real Estate Settlement Procedures Act (RESPA), Truth-in-Lending Act (TILA), Homeownership and Equity Protection Act (HOEPA) and the Home Mortgage Disclosure Act (HMDA).
Additionally, the new CFPB director will have free reign to extend its jurisdiction to establish regulations for other consumer issues. This huge power of the CFPB under the proposed bill will require that the CFPB director publish a list of the rules and orders under its jurisdiction before the Treasury Secretary transfers power to the CFPB in the Federal Register.
The concept of the CFPB has many of the attributes that the Administration conceived for it. The notion has been that because existing regulators failed to stop abusive lending practices, a consumer protection agency was needed. Existing regulations were not enforced and consumer protection was and is a lesser responsibility for a number of agencies. The CFPB was invented to prioritize issues vis-à-vis agencies and implementing regulations. So, the gambit is that the consumer is the CFPB’s sole priority. And since no regulator saw its main job as protecting consumers (or, for that matter, the economy and financial system), the need for the CFPB has been the suggested remedy, thereby rebutting the view that enforcing existing regulations could be relied on in the future.
Here is where I don't understand why we are empowering the CFPB with almost unlimited authority under the guise of consumer protection.
First, we all have come to realize, although our regulators don't fully agree, that had enforcement of existing regulations and laws been in place, the mortgage mess would not have been as messy as it is.
Second, I just don't like to see any government agency that has the powers to just list its responsibilities and jurisdiction in the Federal Register and isn't required to use the process our democracy has lived by for hundreds of years. I can truly accept that consolidating the responsibility regarding consumer protection regulations regarding financial matters into one bureau is both a valid and expeditious move. However, to disregard input from both consumers and the industry affected by its regulatory decisions is not a good move.
From what I see in this massive regulatory reform bill the CFPB is a bureau that is the legislators response to the cries of the consumer for immediate protection. Let's just be careful as the bureau implementation proceeds to be sure that we don't relegate the due process of establishing law with Federal Register publication and comment periods for both pro and con points of views. The details of the CFPB are definitely open-ended in the proposed bill, and I'm hopeful that either prior to passage, or even if passed in its present form, the power of this new bureau will be modified to allow the democratic process of establishing laws. We need due process to be applied to transferring authorities and must have the added public participation in the laws and regulations emanating from this new bureau.
Lastly, my strongest hope for this bureau will be that it has the teeth and manpower to enforce those consumer regulations or laws already in place or for future regulations or laws passed.
For what its worth ... that's my two cents for this week!