Tuesday, February 22, 2011

In Letter to House Leader, Prof. Warren Says Consumer Financial Protection Bureau Regulations Will First Seek to End Duplication

In a letter to House Oversight Subcommittee Chair Randy Neugebauer (R-TX), Professor Elizabeth Warren said that the Bureau of Consumer Financial Protection created by the Dodd-Frank Act was preparing regulations that will deal directly with duplication when it begins to operate on July 21, 2011. For example, she said that the Bureau’s first regulations will combine complicated and duplicative mortgage forms separately mandated by the Truth in Lending Act and the Real Estate Settlement Procedures Act. The Bureau will reduce these forms into a single readable document that will be cheaper for lenders to execute and easier for customers to understand. Professor Warren is an Assistant to the President and Special Advisor to the Secretary of the Treasury. She was responding to an earlier letter from Chairman Neugebauer, in which he asked how the Bureau intended to avoid potentially duplicative or conflicting rulemaking with agencies that will ultimately be under the Bureau’s regulatory authority.

While the Bureau is not currently authorized to prescribe substantive regulations, noted Prof. Warren, the implementation team has been laying the groundwork in order to be prepared to receive rulemaking authority on the transfer date. As part of this effort, the Bureau has been has been monitoring regulatory activity by the Fed, the FTC and others concerning areas over which the Bureau will assume oversight on the transfer date.

The Bureau is conducing ongoing discussions with these agencies to understand their pending regulations and avoid conflicting regulations, she noted, with an eye towards a smooth transition to Bureau oversight. Also, the implementation team is working with the new Office of Financial Research created by Dodd-Frank on developing information technology and human capital resources. Prof. Warren pledged to the Chairman that there would be interagency coordination after the transition period in response to his desire that the Bureau have ongoing interaction with the SEC, CFTC, Fed and other agencies.

The CFPB team is also preparing to carry out the Dodd-Frank requirement that it assess the impact of its regulations on small financial service providers. Before proposing rules, the Bureau will convene panels that draw on expertise from small businesses and government agencies with deep knowledge of small business. These panels will be part of an ongoing effort to assess the effectiveness and impact of CFPB regulations. The Special Advisor said that Senator Olympia Snowe (R-ME), who authored the Dodd-Frank provision on small business impact panels, has already been a key source of advice for the Bureau around this issue.

More broadly, the Special Advisor vowed that the Bureau will be a data driven agency that, in adopting regulations, will always concentrate on making prices and risks of financial products clear up front and on making it easy for consumers to compare one financial product with those offered by competitors. The Bureau is focused on ensuring that consumers have the information they need so that the markets will work for them.