The Consumer Financial Protection Bureau (CFPB) is to officially begin operations on July 21, 2011. That’s one year after the enactment of the Dodd-
Frank Wall Street Reform and Consumer Protection Act, which created this new federal agency. Dodd-Frank says the purpose of the CFPB is “to regulate the offering and provision of consumer financial products or services under the federal consumer financial laws.”
* The Dodd-Frank Act created the Consumer Financial Protection Bureau (CFPB)—a new federal consumer agency.
* The CFPB will oversee 17 consumer regulations.
* Board focus: Make sure you set aside ample financial resources to meet your CU’s growing compliance burden.
The Treasury Department, which is getting the bureau off the ground until the Senate confirms a director, provides further insights: “The CFPB will set and enforce clear, consistent rules that allow banks and other consumer financial service providers to compete on a level playing field and let consumers see clearly the costs and features of products and services.”
Treasury envisions the CFPB “will look out for people as they borrow money or use other financial services…” The CFPB will also monitor the financial marketplace to ensure markets “work as transparently as they can for consumers.”
This is a sweeping mandate for the CFPB and raises questions about how this new agency will affect credit unions. So here are 10 points credit unions should know about the CFPB:
1. Funding. While nominally part of the Federal Reserve System, the CFPB is an independent agency. This means it’s not subject to Federal Reserve Board oversight. Who will pay for the agency was a big question during the legislative debate in Congress last year. Some suggested the regulated entities—including credit unions—pay fees to operate the agency, something CUNA adamantly opposed.
The interesting solution was to make the CFPB part of the Fed, which covers expenses primarily from the income its large portfolio of federal government securities generates. What the Fed doesn’t spend, it returns to the Treasury. So taxpayers will pay for the CFPB operations.
Some Republicans want to repeal Dodd-Frank or at least to eliminate the CFPB, but President Obama would never sign such a bill. The new Congress, however, will have opportunities to revisit the CFPB’s funding. And CUNA will closely monitor any developments.
* Bank and nonbank supervision;
* Rule making;
* Financial education;
* Fair lending and equal opportunity;
* Financial protection for older Americans; and
* Private education loans.
Most of the new agency’s staff will transfer from existing federal agencies, most notably from the Fed’s Consumer Affairs Division—the group that already writes most of the rules implementing federal consumer protection laws. As the financial crisis unfolded, the Fed and other agencies became more active in rewriting consumer regulations, and credit unions must expect more, not fewer, consumer regulations in the next few years.
For instance, expect the new CFPB to give serious consideration to extending to all depository institutions the Federal Deposit Insurance Corp.’s (FDIC) recent “guidance” that adds restrictions on automated overdraft protection programs for FDIC-regulated banks.