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Will the CFPB Make a Difference?

By Sam Glover

The “sweeping financial reform bill” recently enacted created the Consumer Financial Protection Bureau, with the authority to crack down on consumer abuses in connection with things like payday loans, credit cards, and mortgages. It will also have the authority to ban some particularly egregious practices entirely.

The problem with the CFPB is that it is an organization with little more than guidelines. It can do many things. It may also choose not to. Just as the Environmental Protection Agency spends some administrations going soft on polluters, and other administrations prosecuting them, the effectiveness of the CFPB will depend on the person or party in power.

Consumer groups and advocates are falling all over themselves to support Elizabeth Warren, who is smart, savvy, and just the kind of consumer advocate who should lead the CFPB. Hey, I get all excited thinking about having someone like Warren looking out for consumers, too. But what happens when a pro-business administration takes over the White House? Will the CFPB pay lip service to its mission but refuse to enforce the regulations Warren puts in place? Will it revise the regulations themselves, making it easier for financial product peddlers to come up with new, devious ways to undermine the economy?

While I think the CFPB will have a positive effect in the short term, especially if Warren serves as its first director, I worry about it in the long term. After all, the CFPB is not the first agency charged with protecting consumers from things like subprime lending and mandatory binding arbitration. The previous ones just didn’t do their jobs.

Related posts:

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• Elizabeth Warren’s Financial Product Safety Commission
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• Consumer Financial Protection Agency must have teeth and be flexible
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Full post as published by Caveat Emptor on August 11, 2010 (boomark / email).