A Publication of Pepper Hamilton LLP
Financial Services Alert
CFPB Transfer of Authority Set for July 2011
Monday, September 20, 2010
Elizabeth Warren to Lead Establishment of the Bureau
The U.S. Treasury Department announced today that the new Bureau of Consumer Financial Protection (Bureau) established by the Dodd-Frank Wall Street Reform and Consumer Protection Act will assume its responsibilities under the Act on July 21, 2011. Last week, President Obama named Harvard Law School professor and noted Wall Street critic Elizabeth Warren as his special assistant and to assist Treasury Secretary Timothy Geithner as he begins the process of setting up the Bureau. While she will not serve as director of the Bureau, Warren says she will have a “pivotal role” in selecting the first director and will lead policy decisions as the Bureau takes shape and begins its regulatory duties.
The Dodd-Frank Act directed the Treasury Department to transfer consumer protection responsibilities from seven existing regulators to the CFPB within six to 12 months of enactment of the Act. The earliest date Treasury could have chosen was January 21, 2011.” Warren has been a sharp critic not only of the banking industry generally, but to a lesser extent also of Secretary Geithner, so it will be interesting to see how they work together now that she officially reports to him. Geithner and Warren have both publicly said, however, that they share similar views of the mission of the CFPB, which Warren views as acting as the “tough cop on the beat” in supervising the consumer offerings of financial institutions. According to a Bloomberg interview with Warren, one of her first priorities will be to revise credit-card marketing. “Credit-card agreements are still long and they are still hard to read and they are still chock full of surprises,” she said in the interview.
The seven existing agencies that will transfer certain responsibilities to the CFPB are the Federal Reserve Board of Governors (and any Federal reserve bank, as the context requires), the Federal Deposit Insurance Corporation, the Federal Trade Commission, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Department of Housing and Urban Development. The Treasury Department noted that among other duties, the CFPB “will assume responsibility for consumer compliance supervision of very large depository institutions and their affiliates and promulgating regulations under various Federal consumer financial laws.” (For more information on the CFPB, see our previous alert at http://www.pepperlaw.com/publications_update.aspx?ArticleKey=1850 and our recent webinar at http://www.pepperlaw.com/webinars_update.aspx?ArticleKey=1832.)
Before the transfer date, the CFPB will “conduct research relating to consumer financial products and services, develop its nationwide consumer complaint response center, plan and take steps to implement the risk-based supervision of nondepository covered persons, and prepare for the opening of outreach offices,” the Treasury Department stated. “Development of the supervision program for certain nondepository covered persons is particularly significant because no Federal agency previously has had the responsibility of supervising these entities, such as payday lenders, mortgage companies, debt collectors, and consumer reporting agencies.”
The CFPB also will plan “the orderly integration of bank, thrift, and credit union examiners from five different Federal agencies and preparing for rulemakings” required by the Dodd-Frank Act, the notice stated. For example, the CFPB is holding a roundtable regarding the merger of overlapping mortgage forms required by the Truth in Lending Act and Real Estate Settlement Procedures Act, the notice stated.
The CFPB also will be hiring and training examination staff and making other preparations for its supervision program, the Treasury Department noted.
The full text of the Treasury Department notice is online at http://edocket.access.gpo.gov/2010/2010-23487.htm.
Richard P. Eckman
More Resources on the Dodd-Frank Act
Pepper Hamilton also conducted a webinar on this topic, "What the Financial Services Reform Legislation Means for You," on July 15. The webinar recording and PowerPoint slides from our session are available on Pepper's Web site.
For additional information, please visit Pepper's Financial Services Reform Resource Center.
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