Last November, the Consumer Financial Protection Bureau began to take shape after being a part of a bill in Congress signed into law in July 2010. Now, a year later, the bureau is ready to launch. Elizabeth Warren was appointed by President Obama to assemble the bureau, and in this role, Congress pressed her on the bureau’s powers and accountability. In the end, though Elizabeth Warren is suited for the role of director, it became clear that moving her from the role of establishing the bureau to the role of its director would be politically difficult.
The President has nominated Richard Corddray, former Ohio Attorney General, to the role of director of the Consumer Financial Bureau. As director, after being approved by Congress, he’ll oversee consumer issues including credit cards, credit bureaus, payday lenders, mortgage brokers, student loan companies, debt collection, banks, and credit unions.
The Consumer Financial Protection Bureau is charged with being an advocate for consumers in an industry that is often suspected of misleading customers. The playing field isn’t level; with complicated financial products, even the most studious consumers can get caught up in products with terms that are unfavorable. When there’s another news story about a financial company whose salespeople mislead, intentionally confuse, omit important details, pressure customers for their signatures, or outright lie, trust in the industry among the general public decreases. If the new Consumer Financial Protection Bureau works as planned, consumers will be armed with more and better information about financial products and will gradually learn to trust the industry again.
This bureau will have the ability to issue new rules for financial companies and some non-financial companies, but there are many things the bureau will not be able to do. For example, it will not have the power to limit payday loan fees. These fees, which when viewed as interest rates can be equivalent to 100% APR loans, are beyond the reach of the bureau. It will, however, be able to redesign product documents that outline the terms and conditions of financial products, so customers can easily understand and evaluate their products. Credit card companies have already redesigned statements, which help customers see the actual cost of debt.
The bureau will also handle hundreds of thousands of complaints filed by consumers.
Government agencies tend not to work as planned, however. The financial industry lobbies hard to ensure the government doesn’t stand in the way of profits, and while the industry does agree that consumer protections are important, it would prefer to work with the many government agencies already charged with industry oversight. Many politicians will side with the financial industry, moving forward more legislation to limit the role of the new bureau even further.
Published or updated July 25, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.
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Luke Landes founded Consumerism Commentary in 2003 and has been building online communities since 1990. Luke, also known as Flexo, has contributed to PC World Magazine, US News, Forbes, and other publications. 
{ 10 comments… read them below or add one }
I guess this is a good thing, but the bottom line is that people need to educate themselves. Some financial businesses can be very deceptive and sneaky. READ the fine print and ask questions.
I suspect this will do nothing as it was intended, and just make services more costly and financial products more obscure. In the end, like all businesses, financial firms do need to make a profit.
What we need is more effective regulations, and existing regulations enforced properly. Not more nannies.
What, if anything, our government should be more involved in is the education of consumers about financial products. In the end, you should be responsible for your own financial actions. I know, I know that seems like such a foreign concept these days.
I agree with both posters above; I don’t think finances are all that hard to understand; but I work in the industry, so I’m surrounded by it every day. I think basic financial principles should be taught throughout our education system – something more than a “money” chapter in a math book. But in the end, like IJ says above, we should be held accountable for our own financial decisions. Call me a cynic, but I predict it won’t be long before this Agency becomes corrupted by lobbyists from banks, credit card companies, mortgage companies, who are looking out for their own selfish interests.
Here in Missouri we have had the benefit of a very active Attorney General and staff. They enforce the laws that counter fraud – not silly regulations about type-face and bill presentation. Although those regulations are indeed enforced as laws they are a needless waste of our tax dollars. As in the movie “A Few Good Men” a good business case shouldn’t be required to cater to the “terminally stupid” and they can’t be the prescribed elixir for an ailing education system. This is a projection of the class warfare the government seems determined to spark and it’s for THEIR benefit, not ours. Yes “shellye”, it will be corrupted – it probably already is. That doesn’t mean you’re a cynic, just that you’re able to “handle the truth”.
You are very fortunate to have someone in office that takes it seriously.
I think the CFPB could be a very good government bureau to help american consumers but I want to see what influence lobbyists are going to have on this bureau.
To answer your question, I would venture to say ” any and all influence”. It will take a year though to set up that plan.
that is a very good point. on the surface, this would seem to be a good thing, but i question exactly what good will come of it. let us hope that it is not simply business as usual…
I really don’t need another nanny. I wonder how much this is going to cost us? A good ‘enrichment’ to the ‘we need more taxes’ argument.
Many politicians will side with their financial statements. Whoever is putting the money in is who has their ear. This is true of pretty much all politicians. But then again many non-politicians make decisions without getting all the information. If people got all the info before making decisions then the CFPB might not be needed.