On July 21, the bureau will formally open its doors and will be able to send its examiners into Goldman Sachs, JPMorgan Chase and other financial titans — whether or not it has a director. It can also issue new rules for big banks, examine their books and file enforcement actions, all crucial steps for an agency that was born only a year ago.When the CFPB was structured last year as part of President Obama's Wall Street reform legislation - the most significant regulatory reform of the financial sector since the 1930s - a small debate had erupted about what form a consumer protection agency would take. At that time, I posted a full comparison and analysis of the House and Senate approaches, of which the Senate version became law. Please refer to it for comprehensive details on the structure and powers of the CFPB. If you need a quick refresher course on why it was conceived and what it does, this video from the Bureau itself does a pretty good job:
“They have almost unlimited ability to go after the banks on consumer issues,” said Jaret Seiberg, a policy analyst at MF Global. “They’re saying, ‘We’re the new sheriff in town.’ ”
In hindsight, the Senate's plan to house the Bureau inside the Fed and directing money from the Fed to fund it turned out to be both ingenious and invaluable. With the Republicans now controlling the House - and their top priority (after killing Medicare, of course) being to destroy consumer protection - there is every chance that the House would block all funds for the agency (in addition to Fed and other sources, the House version of the bill had a $200 million appropriation from the Treasury a year through 2014), thereby crippling it significantly. With funding from the Fed, they won't be able to do that.
The reason the CFPB will be able to operate with most of its authority from day one is that the law gives Treasury Secretary Geithner the authority to act as the Director of the Bureau for as long as there is a vacancy (and seriously, you idiots on the Professional Left, Geithner never worked on Wall Street, ok?), although a few functions, like regulating payday lenders, will remain out of the Bureau's reach until a Director is confirmed. But the big banks and financial institutions will have the full weight of the nation's first consumer protection agency to deal with from the first day it opens its doors. True to form, one of its first regulations will be to force banks to simplify mortgage forms so that you can, you know, understand what's in them!
The bureau had already announced plans to revamp mortgage disclosure forms that had long confused would-be home buyers. In May, the bureau brought out two prototypes for a simplified, one-page form that would combine and replace existing documents.Check out the two prototypes (here, and here) and compare it to your current mortgage form. What do you think?
As first steps, the bureau will also be eyeing to see if credit card forms are misleading. Wall Street is bracing for a new sheriff in town. The days of screwing the consumer seem limited for them.
Of course, it is called the Consumer Financial Protection Bureau. As such, consumers have a role in shaping it. You can visit the Bureau's website at ConsumerFinance.gov and give your feedback, suggestions, or see what the Bureau is planning and even get help if you have an issue. The other thing you should do is find your senator at Senate.gov and give them a call and tell them to do everything they can to confirm the head of the Bureau as soon as the President nominates one formally (it seems increasingly likely that due to tyranny of the minority from the Senate Republicans, the President may have to make a recess appointment). You best believe the financial industry isn't sitting their waiting for this to happen to them. Why should you?