Consumer Financial Protection Bureau Gets Underway

By | September 23, 2010

Pursuant to the Consumer Financial Protection Act of 2010 (“CFP Act”), which is part of the Dodd-Frank Act, the Secretary of the Treasury has designated July 21, 2011, as the date for the transfer of functions to the Bureau of Consumer Financial Protection (“CFPB”).  On this “designated transfer date,” certain authorities will transfer from other agencies to the CFPB, and the CFPB will be able to exercise certain additional, new authorities under the CFP Act and other laws. After consulting with the heads of the agencies whose functions will transfer to the CFPB, as well as the Director of the Office of Management and Budget, the Secretary of the Treasury found that designating July 21, 2011 as the transfer date will advance the mission of the CFPB and promote an orderly and organized startup.

On the designated transfer date, the consumer financial protection functions currently carried out by the federal banking agencies, as well as certain authorities currently carried out by the Department of Housing and Urban Development and the Federal Trade Commission, will be transferred to the CFPB. In particular, as of the designated transfer date, 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.  The transfer of certain employees from six of those agencies to the CFPB must also occur within days after the designated transfer date. New authorities of the CFPB under subtitle C of the Act, as well as other consumer protection provisions, will become effective on the designated transfer date as well.  In the intervening period, the CFPB will lay the groundwork for an efficient transfer and prepare for consumer protection activities after July 21, 2011.  For instance, prior to the designated transfer date, the CFPB will begin to 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.

Separately, Treasury Secretary Tim Geithner and Elizabeth Warren, Assistant to the President and Special Advisor to the Treasury Secretary, hosted a forum to seek input on the simplification of mortgage disclosure forms so that consumers have the clear and easy-to-understand information they need to make the financial choices that are best for themselves and their families.

Under the Dodd-Frank Act, the newly created CFPB is charged with combining and simplifying two overlapping mortgage disclosure forms that the Truth in Lending Act (TILA) of 1968 and the Real Estate Settlement Procedures Act (RESPA) of 1974, respectively, require lenders to provide to applicants. The forms have converged in some respects over time, yet they remain separate despite more than a decade of attempts to combine them.  Many believe they have remained highly technical and difficult for borrowers to understand. Merging these two forms into one clear, easy-to-understand document is a high priority for the CFPB as the Obama Administration continues its work implementing the consumer protections included in the Dodd-Frank Act.

The Dodd-Frank Act also included a number of provisions that allow the CFPB and other federal regulators to help put an end to mortgage lending practices that proved unsustainable and damaged the overall economy.  For example, the Act requires mortgage lenders to verify a borrower’s income or assets; prohibits incentives that encourage lenders to steer borrowers into higher-cost loans; and requires firms that buy mortgages and package them into securities to retain an interest in certain securities so they will, in other words, keep their skin in the game.

Check frequently for updates on the Dodd-Frank Act.

Contact Steve Quinlivan for more information.