Banks Hurry Up and Wait for Guidance from CFPB

With the Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law, and with new regulation either in place or rapidly taking shape, the question banks must be asking is: What happens next?

In terms of consumer protection, the answer simply might be to keep waiting. But that doesn't necessarily mean things aren't happening.

The Consumer Financial Protection Bureau is preparing for its July 21 mandate to consolidate consumer protection functions that formerly resided with multiple agencies. As Bank Systems & Technology previously reported, the new bureau -- under the leadership of Elizabeth Warren, assistant to the President and special adviser to the Secretary of the Treasury on the Consumer Financial Protection Bureau -- has begun public outreach, attempting to engage Americans through social media and the web. Simultaneously, the CFPB has begun to communicate with financial institutions and other key industries to clarify its mission and answer questions.

Along the way, Warren has been delivering a message of accountability. "Accountability means that someone can be held responsible for failure," Warren told the Society of American Business Editors and Writers during a recent appearance. "With the new consumer agency, there is now someone to call out. Instead of hauling up seven regulators to point fingers at each other, now Congress can haul up one. That's the ultimate accountability."

Warren acknowledged the bureau's limitations, as well, stressing that the rules made by the CFPB are subject to the requirements and limitations of the Administrative Procedure Act and that the agency is subject to judicial review to ensure that it is acting within the constraints set forth by Congress. "But the constraints go further," she added.

"The CFPB is the only bank regulator -- and perhaps the only agency anywhere in government -- whose rules can be overruled by a group of other agencies," she said. "While we cannot interfere with other agencies' rulemaking efforts, no matter how much we think consumers will be harmed by their rules, other agencies can veto our rules. This is an extraordinary restraint."

That isn't to say the bureau believes it is without support. In April it agreed on a Joint Statement of Principles with the National Association of Attorneys General, declaring that the two groups were on the same page in terms of protecting consumers from harmful financial products.

"We believe that Congress is behind us on this mission," Warren told the National Association of Attorneys General. "As part of Dodd-Frank, non-bank mortgage lenders and payday lenders will be subject to significant federal law enforcement for the first time ever. ... Now we will have the tools to deal effectively with some of the worst abuses. On the issue of law enforcement, we are putting our money where our mouth is. We are planning for more than half of the consumer bureau's resources to be devoted to ensuring consistent compliance with the law."