What’s New with the CFPB?
Issues, Progress, and What to Expect Come July 21
We’ve all circled July 21 on our calendars as the launch date for the Consumer Financial Protection Bureau (CFPB). Will the Web come alive with press releases, announcements, and new rules like the fireworks finale on the
Fourth of July? What are the tea leaves saying about the CFPB, and how will
that help us to plan?
after (save your RESPA comments,
however…).
What if There isn’t
a Director yet?
In late November 2010, several members
of the House Committee on Financial
Services sent a letter to the Treasury
Department asking about its efforts in
establishing the CFPB. Among others,
the question was asked whether the
Treasury thought the bureau could operate even if a director hadn’t yet been
confirmed by the Senate by July 21. In
other words, can the bureau issue rules
if it doesn’t have a leader?
The response was “yes”: “If the bureau
does not have a Senate-confirmed direc-
tor by the designated transfer date, the
bureau may continue to operate under
the [Treasury] secretary’s Section 1066(a)
authority. ...Until a director is confirmed,
Section 1066(a) grants the secretary the
authority to … prescribe rules, issue or-
ders and produce guidance related to the
federal consumer financial laws.”
So we could have new rules right
away, prescribed under Treasury Sec-
retary Timothy Geithner, even if there
is no CFPB leader (that’s what the
Treasury thinks about it, anyway). The
bureau won’t wait for the Senate to act
before opening the floodgates.
Elizabeth Warren (the assistant to the
president charged with putting the bureau’s structure together) has stated that
getting out the combined Reg. Z/RESPA
mortgage disclosure (working groups
have already met) and making further
credit card rule changes are priorities for
the bureau.
We can also probably expect rules on
practices that are thought of as unfair
and deceptive, or even abusive under
the Dodd-Frank Act’s new “UDAAP”
(unfair, deceptive, or abusive acts or
practices) standard. These could include
overdraft standards and loan provisions
dealing with prepayment penalties, or
servicing rules.
The flurry has already started. The
Fed amended Reg. Z several times to
implement Dodd-Frank changes to appraisal rules, loan originator compensation, and required escrow thresholds,
and it has proposed changes to Reg.
CC. The FTC (along with the Fed) has
proposed changes to various notices to
incorporate credit scores.
But there is some good news here.
The Fed also announced that it will not
proceed with finalizing three previously issued proposals that would have
substantially changed Reg. Z’s mortgage
provisions (both closed- and open-end).
It will leave any future changes to the
CFPB. So at least we won’t be making changes only to do so again soon
Where Can i See
What the CFPB is Doing?
The bureau now has its own website
(
www.consumerfinance.gov), although
it is in beta at the moment. Much useful information is there, including an
organization chart, press releases, real-life stories of consumers who need the
“cop on the beat” (as the bureau calls
itself on the site), and videos of CFPB
officials making speeches or answering
questions.
Of particular interest is a list of
speeches, op-eds, and blog posts from
Elizabeth Warren. Presently she is the
driving force and de facto leader of the
bureau, so her comments provide insight into what its priorities will be, at
least initially.
What Rulemakings Can
We Expect First?
This is still a great unknown, but we do
have some clues. In various speeches,
how Will the CFPB’s Rules
Be Crafted?
The CFPB has its work cut out for it:
The Dodd-Frank Act requires hundreds
of rules to be amended or created. But
it won’t do this alone; Dodd-Frank prescribes the bureau to solicit input from
many parties in making its rules.
One source of this input is already taking shape. The CFPB and the Conference
of State Bank Supervisors (CSBS) recently
signed a memorandum of understanding
to coordinate supervision and implementation of consumer protection rules. It
provides that CFPB and state regulators
will consult on the standards, procedures,
and practices used for examining financial
services providers. Expect the CFPB to be
very responsive to issues and problems
that originate at the state level.
