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.