The first week of the new Consumer Finance Protection Bureau is off to a difficult start. The new agency, part of the initiatives of the Dodd Frank bill, is the first time there has been a regulator whose sole function is consumer protection. It will oversee credit cards, mortgages, payday loans, etc. There is a concerted effort, however, to water the agency down and efforts to appoint a director are being frustrated until changes are made. It looks like we will have this new agency, but its powers will not be what was anticipated in the Dodd Frank Bill. Both banks and advocates want simplified disclosures, marketing rules, and uniform regulations . Both sides want changes, but the industry (especially the smaller banks) are concerned about the costs.
It is easy to understand why an industry watchdog is needed. Previous attempts to reign in unfair practices in the credit card industry have been circumvented. One example can be seen in the dramatic increase in business card accounts. The rules meant to curb deceptive and unfair practices implemented in 2009, do not apply to business accounts. Now there are a surprising number of "business" account offers to consumers. As long as the applicant concurs that the card is for a business purpose (and the credit card companies generally do not attempt to verify the information), the card will be approved as a business account.
Consider the advertising we typically see for credit cards. The advertisements do not promote that lender offers the least expensive product; rather, they advertise the rewards earned from using the card, or the picture of your pet that is available to be printed on the face of the card. One of the new agency's goals will be to make sure complete information concerning the costs and risks are clearly disclosed to consumers and enable them to be able to compare offered products with other financial products. No longer will lenders be able to push confusing products - consider the "pick-a-payment" loans which are now causing so many homeowners to lose their homes. The new agency will establish rules for mortgage brokers as well. It will clarify the duties a broker has to a consumer - some may be surprised that finding the best loan product for the borrower, is not one of these duties. It is hoped that the new agency will create better informed consumers and a more competitive environment.