The Inspectors General of the Treasury Department and the Federal Reserve have delivered a report concluding that the Bureau of Consumer Financial Protection (CFPB) may exercise a wide range of rule-making and examination powers even if the CFPB does not have a Senate-confirmed Director by the “designated transfer date.” The “designated transfer date” is the date on which certain regulatory authority under a number of consumer protection laws will be transferred to the CFPB from various federal agencies, currently set for July 21, 2011. The report of the Inspectors General was issued last month in response to requests by Rep. Spencer Bachus, the chairman of the House Financial Services Committee and Rep. Judy Biggert, the chairman of the House Financial Services Committee’s Subcommittee on Insurance, Housing, and Community Opportunity, for information about the Treasury Department’s activities to establish the CFPB. One of the questions posed by the chairmen was whether certain interim authority granted to the Treasury Secretary by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) terminates on the designated transfer date and whether, after that date, the CFPB can function only if a Director has been confirmed with the advice and consent of the Senate. The Inspectors General concluded that the CFPB can continue to exercise much of its regulatory authority, including certain rulemaking and examination authority, even if the Senate has not confirmed a Director of the CFPB by the designated transfer date.

Notes: The Dodd-Frank Act established the CFPB as an independent agency within the Federal Reserve that will have authority to make and enforce rules that govern financial products and services offered by banks and other financial institutions to consumers. The report of the Inspectors General determined that the Dodd-Frank Act grants the Treasury Secretary the authority to carry out certain functions of the CFPB before a Director is confirmed by the Senate. Those functions include the authority to prescribe rules, issue orders and produce guidance related to the federal consumer financial laws that were, prior to the designated transfer date, within the authority of the Federal Reserve, the OCC, the OTS, the FDIC and the NCUA. The Inspectors General also concluded that the CFPB may, without a Senate-confirmed Director, conduct examinations of banks, savings associations and credit unions with total assets in excess of $10 billion, and their affiliates, to determine compliance with federal consumer financial laws. The CFPB may also conduct all consumer protection functions relating to the Real Estate Settlement Procedures Act of 1974, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, and the Interstate Land Sales Full Disclosure Act that were previously within the authority of the Secretary of HUD prior to the designated transfer date. The Treasury Secretary’s authority to carry out these and other transferred functions terminates when a Director is confirmed by the Senate, according to the report. The report also states that the Treasury Secretary is not permitted to exercise certain newly-established CFPB authorities, such as the CFPB’s authority to prohibit unfair, deceptive, or abusive acts or practices in connection with consumer financial products and services, without a Senate-confirmed Director.