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Consumer Financial Protection Bureau: Ready or Not, We’re Coming

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The government’s newest consumer watchdog agency plans to hit the ground running, enforcing new rules regarding the nation’s largest banks from the day it opens, even as attacks on its authority and its lack of a permanent director limit the agency’s power in other ways.

The Consumer Financial Protection Bureau opens its doors on July 21. The new agency plans to be ready, with more than 100 staff members tasked to oversee the nation’s largest 111 banking institutions, according to a press release published on Tuesday.

“The new consumer agency is here to make sure that markets work for American families,” Elizabeth Warren, President Obama’s special advisor on the CFPB, said in the release. “Starting on July 21, we will be a cop on the beat—examining banks and protecting consumers.”

The enforcement agents have been pulled from four other federal regulatory bodies, including the Federal Deposit Insurance Corp., the Federal Reserve Board, the Office of the Comptroller of the Currency and the Office of Thrift Supervision. They will be spread among satellite offices in Washington, D.C., Chicago, New York and San Francisco. Their first job, according to the release, will be to reach out to all the major banks to introduce themselves and the bureau’s new process.

After that, the regulators will begin a two-tiered system of enforcement. Big banks will be examined periodically to make sure their products are not harmful to consumers.

For megabanks, especially the big four—Chase, Citi and Wells Fargo and Bank of America—the process will be more intense. Those institutions will require year-round supervision, according to the bureau, to make sure they are following laws regarding consumer protection and fair lending.

Even though the release’s obvious message—that the bureau is opening soon – is straightforward enough, there is an unstated message as well: That despite efforts by banking industry leaders and Republicans in Congress to stop or limit the CFPB, the agency will have significant powers from day one.

“Starting next Thursday, CFPB will be able to enforce the laws concerning the credit card and overdraft and mortgage practices of the biggest banks, and that will help a lot of people,” writes Ed Mierzwinski, director of the consumer program at the U.S. Public Interest Research Group.

A continued power struggle blunts the power of the new agency, however. Republicans in the Senate have taken extraordinary measures to prevent President Obama from nominating Warren, or anyone else, to lead the new agency. One move: preventing Congress from going into recess, to block the president from naming a director without the Senate’s approval.

[Related Article: Nyah, Congress! No Recess for You!]

“”It always seemed clear to me that the Dodd-Frank Act put too much power in the hands of one person,” Spencer Bachus (R – AL) said in a press release.  “The director of the CFPB is given a broad and virtually unlimited mandate to substitute his or her judgment for that of consumers and the free market.”

Without a permanent director in place, the bureau’s power is limited. It cannot regulate non-bank institutions including payday lenders and mortgage companies. It can enforce consumer protection rules written previously by other bank regulators, but it cannot write and enforce its own.

Regardless, Tuesday’s release makes it clear that the bureau plans to use all the power it has now, even without a director. If it finds companies that are not in compliance with existing laws, the bureau’s enforcement staff will impose “appropriate enforcement actions to address harm to consumers,” according to the release.

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Image: consumerfinance.gov

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