Consumer Financial Protection Bureau Set to Take Flight July 21, 2011

Posted on September 21, 2010 by Fred Rivera

September 21, 2010 - The Obama administration designated July 21, 2011 as the date the Consumer Financial Protection Bureau (CFPB) will take over enforcement of federal consumer protection laws, including TILA and RESPA, that impact mortgage bankers.  The announcement was included in a Federal Registry Notice.  

Effective July 21, 2011, the CFPB will have full authority to prescribe rules or issue orders pursuant to any federal consumer financial law (as defined in the Dodd-Frank Act); officially receive staff transfers from the other agencies; and take over supervision responsibility of depository institutions with assets in excess of $10 billion.  The Federal Register Notice also states that, prior to July 21, 2011, the CFPB will begin conducting research on consumer financial products and services, develop its nationwide consumer complaint response center, and begin to plan implementation of its risk-based supervision of non-depository covered persons. The CFPB is planning a roundtable discussion to begin the process of merging Truth-in-Lending (TILA) and Real Estate Settlement Procedures Act (RESPA) disclosures.

The implementation of the CFPB will usher in a new era in consumer finance regulation and enforcement.  The broad CFPB authority will allow it to both write regulations and enforce those regulations in connection with consumer lending, including residental mortgage lending. 

On September 17, 2010, President Obama appointed Elizabeth Warren as Assistant to the President and Special Adviser to the Secretary of the Treasury.  Warren is expected to play a key role within the administration in organizing the CFPB.  In annoucing Warren's new role, President Obama stated "[t]he Consumer Financial Protection Bureau will crack down on the abusive practices of unscrupulous mortgage lenders [and] reinforce the new credit card law we passed banning unfair rate hikes."

Read more about Warren's appointment:  http://www.nytimes.com/2010/09/16/business/16consumer.html?_r=1&scp=2&sq=elizabeth%20warren&st=cse

 

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Creation of Consumer Financial Protection Agency One Step Closer with House Financial Services Committee Vote

Posted on October 23, 2009 by Fred Rivera

In a 39-29 vote, on October 22, 2009 the House Financial Services Committee approved legislation (H.R. 3126) establishing an independent federal agency charged with overseeing financial products and services. Under the legislation, the Consumer Financial Protection Agency (CFPA) would be an independent agency headed by a Presidentially-appointed and Congressionally-approved Director appointed to a five year term.  The CFPA's responsibilities would include rulemaking, examination and enforcement of financial institutions that provide consumers with financial products and services.  The rulemaking authority of the Federal Reserve Board and other Federal banking regulator agencies under current consumer banking laws would transfer to the CFPA.

A press release from Committee Chairman Barney Frank states that, in addition to having enforcement and broad examination powers, "the agency will closely monitor the marketplace for any new financial products or services that could potentially harm consumers as well as the larger economy. Once the agency identifies these threats or abuses, it will have the power to write rules that can regulate, restrict or ban them. It will also have the power to establish guidelines so that companies issue clear and fair disclosures to customers on products such as credit cards and mortgages. "

The proposed CFPA includes an Office of Fair Lending and Equal Opportunity responsible for enforcement of the Equal Credit Opportunity Act (ECOA), the Home Mortgage Disclosure Act (HMDA), and coordinating with other federal agencies regarding fair lending matters.

The Committee vote is only the first step in what is likely to be a long process towards the creation of a new consumer financial services oversight agency.  Many issues remain, including exemptions for small banks, the remaining scope of the Federal Reserve Board's authority, enforcement powers, and preemption.  The CFPA also faces strong opposition from many corners, including from the American Bankers Association.

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