Dennis' Mortgage Blog

Part of the two thousand page Dodd-Frank Act was the establishment of the Consumer Financial Protection Bureau. On July 21, 2011 the Consumer Financial Protection Bureau (CFPB) will officially get into action.  Established under the Dodd-Frank Act, the CFPB's central mission according to its website is to "make markets for consumer financial products and services work for Americans."  "Markets" defined applying for a mortgage, credit cards, or "using any number of other financial products." The Secretary of the Treasury has the duty to set up the CFPB, but from recent Congressional hearings it is uncertain if the Treasury also has oversight over the CFPB, in fact it was unclear who has oversight over the bureau.

Elizabeth Warren is the Assistant to the President and Special Advisor to the Secretary of the Treasury on the Consumer Financial Protection Bureau.  That is a lot to get on the second line of the business card, but that is her official title.  Her real title is head of the CFPB as it gets set up, technically she is an interim bureau head, interim because that avoids Senate confirmation of Warren for her duties.  This gets very messy because until July 21st when several other agencies, that have Senate confirmed leadership, divest some of their responsibilities and authority to the CFPB, they still have authority to make regulations and policies.  Because the CFPB does not have a Senate confirmed leader and because its charter does not begin until July, it is unable to regulate to fulfill many of the duties listed on its website.  It cannot make rules, it cannot supervise and it cannot enforce.  Technically.

Since Warren's appointment in September she has, according to many in Congress, been acting outside the scope of her authority since she was not confirmed by the Senate and has been active in establishing the CFPB, a duty that Dodd-Frank states is to be done by a director appointed by the President and confirmed by the Senate.  Since she has set up the CFPB, which includes determining its direction, its focus and its structure, many assume she will be appointed as the permanent head of the bureau, perhaps by a recess appointment by President Obama. 

The question of who will lead the CFPB on July 21st is a sticky one since if another person is confirmed by the Senate, i.e. Warren is not, that person will take over a massive bureau created from the ground up by Warren. 

Obama's choice of Warren to set-up the CFPB is not extremely popular with many in the financial industries she has been establishing policy to regulate.  Some may say this is good news and there should be an antagonistic relationship from the CFPB and those it will regulate.  The primary objections to Warren however are not potential antagonism, that is to be expected from any regulatory body (see the Fed, HUD, FDIC,...), it is that she lacks the qualifications to oversee the financial markets and industries as she lacks any relevant experience.

Warren's biography lists zero experience in any financial, or any private, company or endeavor.  She is a law professor and advisor, she has never worked in the private business sector.  Warren has written books and "more than a hundred scholarly articles dealing with credit and economic stress" but has never taken a loan application, made a credit decision, supervised a department extending consumer credit or handling consumer investments.

Why is this important? Because Warren is setting up and may be permanently running the department that will have an impact on you and your financial well-being.  Your credit cards, mortgages, auto loans, IRA, 401(k), investment accounts, savings account and checking account will all be under the authority of the CFPB.  In the past two years we have seen what has happened to our credit card fees, bank fees and health insurance fees as regulations, or proposed regulations, to "benefit the consumer" have instead hurt us financially.  The CFPB as set up has no Congressional oversight and will have a huge impact on our lives. 

Who runs the CFPB and how it is run is important.