A new Consumer Financial Protection Bureau (CFPB) is scheduled to open its doors on Thursday, despite controversy and continued efforts by critics suggesting that the agency has too much regulatory power.
The bureau’s undeterred leader, Harvard law professor Elizabeth Warren, has forged forward despite vehement opposition by many members of Congress to her work. Warren was appointed by President Barack Obama to set up the agency, which Warren herself designed prior to the legislation, which made it a reality.
On Monday, the president announced his intent to nominate former Attorney General of Ohio Richard Cordray to serve as the first director of the CFPB, ending months of guessing by pundits over whether Warren would be offered the job.
It is unclear whether Cordray will be confirmed by the Senate, as the law requires. The GOP has vowed to oppose any appointment until significant changes to the agency’s structure are made. A Senate banking hearing held this week heard testimony charging that the agency has too much regulatory authority, and access to a budget free from congressional oversight.
The new agency “will be a cop on the beat to enforce the laws on credit cards, mortgages, student loans, prepaid cards, and other kinds of financial products and services,” said Warren in a report released by the agency this week.
The agency has regulatory authority over credit cards, mortgages, and a host of other consumer financial products previously handled by seven other authorities.
The U.S. Chamber of Commerce, in a website posting, is warning that the agency “presents a potent threat to the price and availability of credit.”
In less than a year, since the agency was established, Warren has overseen the hiring of 400 staff, the creation of a new mortgage form with enhanced disclosure requirements, new rules overseeing credit card disclosures, as well as the setup of a place where consumers can register complaints.
“I’m not taking my eye off those who want to cripple this agency. We got this agency by fighting, we stood it up by fighting, and, if takes more fighting to keep it strong and independent, then we can do it,” said Warren, in a White House blog post in support of Cordray’s appointment.
The agency was formed just over a year ago by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Dodd-Frank includes a significant number of regulatory reforms affecting U.S. financial institutions. The CFPB is meant to directly protect consumers.
According to Warren, the bureau is designed to make markets for consumer financial products and services work in a fair, transparent, and competitive manner. Central to her position is the idea of creating a “level playing field,” where consumers are able to understand the terms and risks of an agreement, such as a loan or a new mortgage. The expectation is that consumers will be better equipped to compare products before buying.
Andrew Pincus, partner in the law firm Mayer Brown LLP, testifying before the Senate Banking Committee said, “The bureau’s unique and unprecedented structure deviates radically from the fundamental principles of accountability and checks and balances that have been a basic feature of our government for 224 years.”
Pincus said that the director has sole decision-making authority with regard to rule making. The director has the ability to appoint all agency employees, authority over the budget, and policy independence from the president. He or she cannot be removed by a president unless there is a case of “inefficiency, neglect of duty, or malfeasance in office.”
While Pincus says that no other agency has this kind of autonomy, Warren argues that SFPB is subject to certain other levels of oversight that are either rare, or unique among agencies.
Warren also says that CFPB activities are subject to judicial review, ensuring that the agency operates within the constraints set by Congress and the U.S. Constitution. She also points to the ability of other banking regulators to use a two-thirds majority to veto any rule made by the CFPB. Despite this being an unprecedented constraint, critics argue it sets the bar too high to be effective.
Accountability of the director is also minimized by the vague language of its statutory mandate, according to a Diane Katz, in a report produced for the right-leaning Heritage Foundation.
The statute empowers the agency to punish “unfair, deceptive and abusive” business practices. According to Heritage, the problem is that the term “abusive” is largely undefined, granting “inordinate discretion” to the director to define it.
The FTC has generated years of case law to guide the former, but the new mandate to regulate abusive activity is new, essentially giving the agency a blank slate, Pincus stated during testimony.
A group of Republican senators have proposed legislation to amend the powers of the agency. H.R. 1121 would replace a single director with a five-member commission, and a separate amendment, H.R. 1315, makes changes to the ability of other regulators to overturn a rule created by the CFPB.
The president said in a recent press conference that lobbyists and lawyers have spent tens of millions of dollars this year to try to weaken the laws to protect consumers.
Obama said: “I will fight any efforts to repeal or undermine the important changes that we passed. And we are going to stand up this bureau and make sure it is doing the right thing for middle-class families all across the country.”
The bureau’s undeterred leader, Harvard law professor Elizabeth Warren, has forged forward despite vehement opposition by many members of Congress to her work. Warren was appointed by President Barack Obama to set up the agency, which Warren herself designed prior to the legislation, which made it a reality.
On Monday, the president announced his intent to nominate former Attorney General of Ohio Richard Cordray to serve as the first director of the CFPB, ending months of guessing by pundits over whether Warren would be offered the job.
It is unclear whether Cordray will be confirmed by the Senate, as the law requires. The GOP has vowed to oppose any appointment until significant changes to the agency’s structure are made. A Senate banking hearing held this week heard testimony charging that the agency has too much regulatory authority, and access to a budget free from congressional oversight.
The new agency “will be a cop on the beat to enforce the laws on credit cards, mortgages, student loans, prepaid cards, and other kinds of financial products and services,” said Warren in a report released by the agency this week.
The agency has regulatory authority over credit cards, mortgages, and a host of other consumer financial products previously handled by seven other authorities.
The U.S. Chamber of Commerce, in a website posting, is warning that the agency “presents a potent threat to the price and availability of credit.”
In less than a year, since the agency was established, Warren has overseen the hiring of 400 staff, the creation of a new mortgage form with enhanced disclosure requirements, new rules overseeing credit card disclosures, as well as the setup of a place where consumers can register complaints.
“I’m not taking my eye off those who want to cripple this agency. We got this agency by fighting, we stood it up by fighting, and, if takes more fighting to keep it strong and independent, then we can do it,” said Warren, in a White House blog post in support of Cordray’s appointment.
The agency was formed just over a year ago by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Dodd-Frank includes a significant number of regulatory reforms affecting U.S. financial institutions. The CFPB is meant to directly protect consumers.
According to Warren, the bureau is designed to make markets for consumer financial products and services work in a fair, transparent, and competitive manner. Central to her position is the idea of creating a “level playing field,” where consumers are able to understand the terms and risks of an agreement, such as a loan or a new mortgage. The expectation is that consumers will be better equipped to compare products before buying.
Andrew Pincus, partner in the law firm Mayer Brown LLP, testifying before the Senate Banking Committee said, “The bureau’s unique and unprecedented structure deviates radically from the fundamental principles of accountability and checks and balances that have been a basic feature of our government for 224 years.”
Pincus said that the director has sole decision-making authority with regard to rule making. The director has the ability to appoint all agency employees, authority over the budget, and policy independence from the president. He or she cannot be removed by a president unless there is a case of “inefficiency, neglect of duty, or malfeasance in office.”
While Pincus says that no other agency has this kind of autonomy, Warren argues that SFPB is subject to certain other levels of oversight that are either rare, or unique among agencies.
Warren also says that CFPB activities are subject to judicial review, ensuring that the agency operates within the constraints set by Congress and the U.S. Constitution. She also points to the ability of other banking regulators to use a two-thirds majority to veto any rule made by the CFPB. Despite this being an unprecedented constraint, critics argue it sets the bar too high to be effective.
Accountability of the director is also minimized by the vague language of its statutory mandate, according to a Diane Katz, in a report produced for the right-leaning Heritage Foundation.
The statute empowers the agency to punish “unfair, deceptive and abusive” business practices. According to Heritage, the problem is that the term “abusive” is largely undefined, granting “inordinate discretion” to the director to define it.
The FTC has generated years of case law to guide the former, but the new mandate to regulate abusive activity is new, essentially giving the agency a blank slate, Pincus stated during testimony.
A group of Republican senators have proposed legislation to amend the powers of the agency. H.R. 1121 would replace a single director with a five-member commission, and a separate amendment, H.R. 1315, makes changes to the ability of other regulators to overturn a rule created by the CFPB.
The president said in a recent press conference that lobbyists and lawyers have spent tens of millions of dollars this year to try to weaken the laws to protect consumers.
Obama said: “I will fight any efforts to repeal or undermine the important changes that we passed. And we are going to stand up this bureau and make sure it is doing the right thing for middle-class families all across the country.”
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