On paper, the Consumer Financial Protection Bureau was created two years ago by the Dodd-Frank financial reform law.
Since then, regulators have been working to turn a paper agency into a real one, hiring personnel, putting up a website and figuring out how to carry out their mandate: protecting consumers from predatory financial practices that were widespread in the run-up to the financial crisis.
In the process, the nascent agency faced opposition to its funding and the appointment of its first director, Richard Cordray, from some lawmakers and financial industry trade groups. Even so, one year after it opened its doors, the CFPB appears to have gotten off to a good start.
The agency remains popular with the American public. Of people likely to vote in 2012, 66 percent agreed that the CFPB is needed, according to a poll conducted this month for a coalition of consumer advocacy groups including the AARP and Americans for Financial Reform.
The agency also has won effusive praise from consumer advocates, who laud it for its responsiveness to consumers and transparency.
"The CFPB has been enormously successful in ramping up over its first year," says Ed Mierzwinski, consumer program director at the Federation of State Public Interest Research Groups in Washington, D.C. "They've taken on an entire financial industry, and they've changed the culture of bank regulation as it pertains to consumer protection already."
What the CFPB has done
Mierzwinski highlights several actions he sees as evidence the agency is off to a good start.
- Deciding to regulate consumer credit bureaus such as Experian to ensure they keep accurate records and correct errors in a timely manner.
- Expanding consumer protection rules to cover remittance transfers, which millions of Americans use to send money to relatives overseas.
- Setting up a streamlined consumer complaints process accessible online or over the phone and putting those complaints into a searchable public database.
- Creating a user-friendly and attractive website focused on serving consumers rather than the institutions that the CFPB regulates.
That consumer focus represents a big change in the way financial regulators such as the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency had operated, Mierzwinski says.
"Most consumers vaguely knew that the FDIC had something to do with protecting them but didn't have a clue about the OCC and the Fed, and one of the reasons for that was that the OCC and the Fed never reached out to consumers," he says. "All levels (of leadership) at the CFPB are out on the road constantly talking to banks and talking to consumers and talking to businesses about how to do their jobs better and make the marketplace work."
Even with the success the agency has had in its first year, it still has a lot more work to do, Mierzwinski says.
"They need to continue to grow," he says. "We're looking for them to do more enforcement actions. We're looking for them (to complete) more rules."
So far, the agency has only taken one enforcement action against a financial services provider. On July 18, it ordered Capital One to return $140 million to $150 million to customers over "misleading and deceptive" marketing of credit card add-ons such as credit monitoring and payment protection services. The company will pay an additional $60 million in penalties to regulators.
"I'm completely happy with the fact that they did one, and they did one well," Mierzwinski says. "One more next year is not good enough, but I don't think that's going to be the case."
CFPB gets high marks
Remarkably, given their staunch opposition to the agency's creation during the run-up to passage of Dodd-Frank, financial industry professionals say they have been pleasantly surprised by the direction the CFPB has taken so far, says Anne Wallace, senior director of consumer financial services for the Financial Services Roundtable, a financial industry trade group.
"The industry had a lot of question marks as to what this was going to be like. Sometimes people fear the worst," Wallace says. "But in fact, the people at CFPB want to build, as they put it, a 21st-century agency that communicates directly with consumers, that communicates a lot with the industry, that's fact-based, data-based, and this is a new model."
Wallace has been impressed by the CFPB staff with which she's had dealings.
"My experience has been quite positive," she says. "We have worked quite closely with them on a variety of regulatory issues, and the first thing you notice about them is how smart they are. They have some really top people who are committed, hardworking and genuinely curious about how the industry works."
She says CFPB regulators have been more accessible and transparent than regulators in the past, and that has helped foster good relations with the banks they oversee.
"They will call you back sometimes after hours," she says. "I've been a banking lawyer for a long time, and I think they are more transparent than the other agencies I've dealt with."
Still, the agency has faced the growing pains of an organization that's gone from zero employees to nearly 1,000 in just two years.
"I think that the CFPB is still finding its sea legs," says William Binzel, counsel to the board of the National Foundation for Credit Counseling in Washington, D.C. "The way that the statute is written, it gives them a tremendous amount of responsibility and regulatory authority, and I think they're trying to find their stride as to what are the priorities at this point and where their focus should be initially."
At times, the agency also has struggled to deal with preparing its employees to handle the flood of consumer complaints. An independent audit commissioned by the CFPB in the fall of 2011 found problems with coordination and responses to consumer calls.
The rush to staff the new agency also has created some challenges for financial industry professionals, Wallace says.
"They've hired close to 1,000 people in a year, and so it's hard to keep track of who's there and to know who to call sometimes," Wallace says. "It's just a maturation process."
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