Why does the Con­sumer Fi­nan­cial Pro­tec­tion Bu­reau Mat­ter?

The Dodd-Frank Wall Street Re­form and Con­sumer Pro­tec­tion Act cre­ated the Con­sumer Fi­nan­cial Pro­tec­tion Bu­reau, a new and pow­er­ful fed­eral bu­reau­cracy with a man­date to en­hance con­sumer fi­nan­cial pro­tec­tion un­der a host of new and ex­ist­ing con­sumer pro­tec­tion laws. Ac­cord­ing to the cur­rent sched­ule, the CFPB will ab­sorb a sig­nif­i­cant por­tion the con­sumer pro­tec­tion func­tions (re­search, rule­mak­ing, guid­ance, su­per­vi­sion, ex­am­i­na­tion and en­force­ment) of the Fed­eral Re­serve, the FDIC, the FTC, the NCUA, the OCC, the OTS and HUD as of July 21, 2011.

De­pend­ing on how the man­date is im­ple­mented, it could re­sult in a shift from a dis­clo­sure regime to­wards a rules-based regime - a change that would in­vite both fed­eral and state reg­u­la­tors to take a fresh look at some long-stand­ing in­ter­pre­ta­tions of sep­a­rate but re­lated con­sumer pro­tec­tion laws. As such, the meth­ods by which frac­tion­als, time­shares and travel club mem­ber­ships are sold and fi­nanced are po­ten­tially sub­ject to some sig­nif­i­cant changes.

Hos­pi­tal­ity Lawg Up­dates

Given this po­ten­tial, the Hos­pi­tal­ity Lawg will be track­ing CFPB de­vel­op­ments and re­port on them as ap­pro­pri­ate. In early Jan­u­ary, we re­ported on some ini­tial or­ga­ni­za­tion and staffing de­vel­op­ments at the CFPB. This post fo­cuses on de­vel­op­ments from Feb­ru­ary.

  • Big Bu­reau, But Leader Still Un­de­ter­mined

Pres­i­dent Obama's bud­get con­tem­plates over 1200 hires at the CFPB. But with only a lit­tle more than 5 months be­fore the July 21 launch date, Pres­i­dent Obama has not nom­i­nated a di­rec­tor for the CFPB. With­out a di­rec­tor, Sh­eryl Har­ris at the Plain Dealer re­ports that the au­thor­ity of the CFPB may be sig­nif­i­cantly lim­ited. And Brady De­nis at the Wash­ing­ton Post re­ports that the US Cham­ber of Com­merce is tak­ing steps to con­firm that limit on the CFPB’s au­thor­ity.

  • Con­sumer Out­reach

The CFPB launched its web­site in early Feb­ru­ary. The site's fo­cus on so­cial me­dia backs up Eliz­a­beth War­ren's stated goal of hear­ing from con­sumers as the agency is un­der de­vel­op­ment. On the not-so-wel­com­ing side, the site fea­tures a very large badge and the phrase "Wel­come to the Bu­reau." The site states that:

"The cen­tral mis­sion of the Con­sumer Fi­nan­cial Pro­tec­tion Bu­reau (CFPB) is to make mar­kets for con­sumer fi­nan­cial prod­ucts and ser­vices work for Amer­i­cans—whether they are ap­ply­ing for a mort­gage, choos­ing among credit cards, or us­ing any num­ber of other con­sumer fi­nan­cial prod­ucts."

  • Warn­ing Shots

The site also refers to the CFPB as a "neigh­bor­hood cop on a beat." Peggy Twohig, the "Non-Bank Su­per­vi­sion Team Lead," de­scribed her unit's fo­cus as fol­lows:

"Many com­pa­nies other than banks pro­vide con­sumer fi­nan­cial prod­ucts and ser­vices. These non­bank com­pa­nies in­clude mort­gage lenders, mort­gage ser­vicers, stu­dent lenders, pay­day lenders, credit bu­reaus, and debt col­lec­tors. Non­bank fi­nan­cial com­pa­nies can have a huge im­pact on con­sumers, but, un­like banks, they have not been sub­ject to reg­u­lar Fed­eral re­views to make sure they play by the rules. My team is plan­ning a new Fed­eral su­per­vi­sion pro­gram to over­see these com­pa­nies. When banks and non­bank com­pa­nies are sub­ject to sim­i­lar Fed­eral over­sight, con­sumers across the en­tire mar­ket­place will be bet­ter pro­tected

In Richard Cor­dray's first in­ter­view since ar­riv­ing to set up the CFPB's en­force­ment op­er­a­tions, Jean Ea­gle­sham of the Wall Street Jour­nal re­ports that Cor­dray sug­gested he will use the same ag­gres­sive ap­proach that he was known for in his pre­vi­ous job as Ohio's at­tor­ney gen­eral. Last year, the 51-year-old Mr. Cor­dray de­scribed the fore­clo­sure prac­tices used by com­pa­nies now un­der a na­tion­wide in­ves­ti­ga­tion as "a busi­ness model built on fraud."