Home > Personal Finance > Congress Quietly Charts a Path for the Consumer Financial Protection Bureau

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E_Warr_CFPB_USGovtWorkLast week all the news about Congress focused on the budget battle and whether the inability of Democrats and Republicans to agree would result in a government shut-down. While the budget battle raged in public, a deal on another contentious issue was being quietly forged. It looks like the left and the right might actually reach an agreement, and the result could be good for consumers. I’m talking about the Consumer Financial Protection Bureau, how it will be managed, and who will be in charge.

Last week, the House Subcommittee on Financial Institutions and Consumer Credit held a hearing to discuss the future of CFPB, and it seems a deal is in the works. The agency has been hotly debated since it was first proposed.

Title X of the Dodd-Frank Wall Street Reform Act created the CFPB, and called for it to be run by a single director appointed by the President and confirmed by the Senate. Consumer advocates strongly supported Elizabeth Warren for the appointment. Professor Warren has written and spoken about consumer protection for a couple decades, and after all, the Bureau was her brainchild; who better than she to be its first director?

[Related article: The CFPB and Congress’ Need for an Adult Conversation]

The banks gagged at the thought. The position would be an extremely powerful one, and they viewed her as far too doctrinaire for job. There were doubts about whether she could be confirmed by the Senate, even before the mid-term elections. The White House charted a shrewd course; rather than nominate her and have a confirmation battle that might fail, or pass her over for someone else and incur the wrath of her supporters, the President named her as a Special Advisor to the Treasury Department, charged with getting the agency up and running.

So what has happened during her tenure of several months? Lots of good work and little controversy. Her appearances before Congressional committees by and large have gone well. She has been smart, respectful, and inclusive. Her answers to tough questions have generally been…reasonable. No fireworks. Lots of competence.

But some more radical elements have vowed not only to keep her from ever becoming the Director, but have advocated dismantling the bureau before it even becomes operational in July. The rhetoric on both sides hinted that we might be in for a showdown that could paralyze things as only Congress can do so well.

[Related article: The GOP’s Plans for Financial Reform]

Then, rumors of a compromise began to surface. The Republicans would allow Professor Warren to be confirmed as the first head of the CFPB. In exchange, the Democrats would agree to amend the structure of agency from a single director to a five-member bipartisan board, which Professor Warren would chair.

The idea for a board as opposed to a single director is not a new one. The original House-passed version of the bill that became Title X of the Dodd-Frank Act included a five-member board as part of the leadership on the consumer protection agency that eventually became the CFPB. The White House’s original proposal for financial reform, released in June 2009, called for the creation of a consumer financial protection agency governed by a board. One might assume, then, that a return to the original governance proposed by the White House and the Democratic leadership in the House of Representatives would not be too hard to sell now to the Congressional Democrats. I happen to think this compromise, if it comes about, may be even better for consumers.

How it Could Work »

Image: Consumer Financial Protection Bureau, via Flickr.com

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  • Brenda Smith

    I think President Obama had a great idea about having a Consumer Protection Agency,
    and it could work, & involving members of Congress too. Lets say for instance a consumer has a problem with a bank forging a mortgage and trying to steal their land.
    In Florida it requires a notary acknowledgement by the property owner, and it is mandate funds be disbursed. Common sense. So Consumer Protection Agency could
    have a form to give to all our representatives, to give a consumer to fill out, and our elected representative submits it to the bank, and if the bank doesn’t have it, Congress
    and the Consumer Protection Agency should say “go back to school, quit living in the
    twilight zone, correct your records, and apologize for causing stress to the homeowner”. And I think we can save money too, like hiring the Chief of Consumer
    Protection Agency as GS-11 and trainees like GS-5, GS-7, GS-9 (giving them opportunity to grow). There are lots of people unemployed who would take the jobs. We could hire lower levels in every state. I heard banks are afraid the agency will hurt
    their business, but maybe they will not be so defenseless if they know, they will not
    be required to shell out millions, billions, of bucks … just correct their mistakes.
    Like Pres Obama said “treat your neighbor as you treat yourself”. Opinions are like
    elbows, everybody has a couple. This one is mine. And, the Consumer Protection Agency can use Skype and talk to people so they know what is going on. You have a lot of talent in Americans. We need Florida attorney generals to help, but we had a problem one of them was a lobbyist for the mortgage industry … didn’t help … so how
    cool is that. Not.

  • Pingback: Harvard Law and Policy Review » Will the new CFPB Director be our First Real ____ Czar?()

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