In a major address on the Dodd-Frank Act at NYU, Senator Christopher Dodd defended the Act’s accomplsihment of creating a Bureau of Consumer Financial Protection out of the existing authority currently scattered throughout an alphabet soup of ineffective regulators and consolidating it into one focused and effective Bureau. The job of consumer protection was divided up among seven different regulators. And rather than being seven times as effective, noted Senator Dodd, each regulator had a separate primary mission and consumer protection was just an afterthought to issues like safety and soundness.
The senator rebutted criticism that Dodd-Frank housed the consumer protection bureau within the Federal Reserve, as opposed to establishing it as a stand-alone agency. In some ways this worked to the Bureau’s advantage, he explained, since because Congress set up the Bureau within the Federal Reserve its budget is protected. If Congress had left the consumer protection bureau as a stand-alone agency, he reasoned, its opponents could have tried to cut off its funding. But insulating the Bureau from the congressional appropriations process ensures that it will have the resources it needs to be effective.
The benefit won’t just be a more effective consumer watchdog, assured Senator Dodd, since financial firms will benefit from a streamlined and minimized regulatory burden. And this single new agency with one mission, protecting and empowering consumers, and the resources to get the job done, will be more easily held accountable for its performance. Senator Dodd also said that the Bureau will be a regulatory watchdog with bark and bite, and one with the ability to take meaningful action to stop the rip-offs and empower consumers to make good financial decisions.
The Bureau will force the big banks and the credit card companies to explain their offerings in plain language. It will establish an Office of Financial Literacy and a national consumer complaint hotline so that, whether you’re trying to make a difficult financial decision or are just concerned about a possible rip-off, unbiased and reliable assistance is just a phone call away.
The Bureau is not going to regulate accountants and orthodontists, the Banking Committee Chair assured. In fact, it isn’t going to regulate anyone who, in the words of Dodd-Frank, is not engaged significantly in offering or providing consumer financial products or services.