Congress looking to reign in financial protection bureau
Members of Congress are exploring options to cut back on the regulatory powers of the Consumer Financial Protection Bureau. Some feel the agency that will regulate everything from mortgages to payday loans has too much power. However, the head of the agency insists that greater protection is needed.
Elizabeth Warren faces off against Republican-packed House
A recent hearing of the House Financial Services Committee turned into a sparring match between members of Congress and Elizabeth Warren, head of the Consumer Financial Protection Bureau, according to USA Today. The CFPB was created by legislation last year, but it will not begin operating until July. Warren was unfazed during the hearing, asserting that if a similar agency had been in place years ago, irregularities in the mortgage industry would have been noticed and dealt with sooner. The agency, part of the Federal Reserve, is intended to ensure greater transparency and fairness in consumer finance products including mortgages, credit cards, installment loans, check cashing and payday loans.
Reach of new agency too pervasive, say Republicans
Congressional Republicans have objected to the laws that created the bureau, contending that the agency is granted too much authority with too little oversight. Members of the House Financial Services Committee also objected to the CFPB having too much discretion because it could technically pick and choose which regulations and sanctions it could impose, though Elizabeth Warren countered that the Federal Reserve has the power to override any decision that the CFPB makes. House Republicans also object to Warren’s involvement, according to CNN, as the agency does not have a director. The director of the agency has to be appointed by the Senate, and Warren is technically only an adviser to the President and the Treasury. Dr. Warren is a professor at Harvard Law School and an expert on consumer advocacy law.
Treasury points out lack of power
Congressional Republicans had previously been critical of the agency for participating in recent foreclosure reform efforts related to the “robo-signing” scandals. Treasury Secretary Timothy Geithner was quick to inform Congress that the CFPB is not operational yet and had no consequential involvement in resolving any disputes in foreclosure procedures, according to Bloomberg. Secretary Geithner advised Congress that any functions of the agency until July 21 are in an advisory capacity only. On July 21, the agency could indeed become a powerful force. The CFPB could change the nature of consumer finance. For instance, the CFPB could decide to cap interest rates on short term loans, which could send payday lenders out of business and grant credit card companies a virtual monopoly on small-scale consumer credit.