A Quick Look at the Current State of the CFPB

Navigator Edition: March 2012
By: John Grund and Matteo Tinari

The formation of the Consumer Financial Protection Bureau in 2011 raised more questions than answers in terms of the Bureau’s scope of oversight, priorities, and leadership. Of course, there was a fair amount of controversy surrounding the CFPB to begin with; especially considering President Obama appointed Elizabeth Warren to oversee it, in the aftermath of the credit crisis when banks were in many ways Public Enemy #1. Warren, formerly a policy advocate and professor at Harvard Law School, served as the Bureau’s Special Advisor and Assistant to the President until July 2011.

The CFPB has since evolved, but the political controversy continues as President Obama made Richard Cordray the Bureau’s director in a contentious recess appointment. In any case, we wanted to take a fresh look at the leadership team of the CFPB and the activities underway as well as those on its radar screen as it relates to electronic payments. Refreshingly, the leadership of the CFPB is diverse and is not a roster full of Washington insiders. Moreover, CFPB has engaged in discussions with industry stakeholders in a rather open fashion and is quite progressive with respect to town hall sessions, research initiatives, and the use of its own website (www.cfpb.org).  As Figure 1 illustrates, several members of the leadership team have significant experience in the credit card industry while others have ties to nonprofit think tanks, prominent law firms, and academia.

While the Bureau is in its infancy relative to most legacy government agencies and it is easy to get caught up in the political debate surrounding its formation and span of control, its mandate is rather clear:  to promote fairness and transparency for mortgages, credit cards, and other consumer financial products and services.  Its early initiatives such as the “Know Before You Owe” campaign and its work on statement formats/disclosures are a clear signal of its direction.  While there are plenty of legacy industry practices that are candidates for improved transparency, much of the fine print can be traced back to regulatory requirements themselves.  The “win/win” would be having the CFPB take a holistic view of both industry practices and the regulatory requirements that may drive some of the challenges with respect to transparency, simplicity, unintended consequences, and fairness.

Figure 1: CFPB Leadership


Figure 2: Summary of Major CFPB Payment-Related Initiatives1


Source: Consumerfinance.gov, American Bankers Association (ABA.com).
The CFPB has developed other initiatives that open secure lines of communication for whistle-blowers, investigate the private student loan industry, educate consumers comparing federal student aid packages, and simplify mortgage closing documents.

For more information, please contact John Grund, Partner specializing in Card Issuing,john.grund@firstannapolis.com; or Matteo Tinari, Analyst specializing in Merchant Acquiring,matteo.tinari@firstannapolis.com

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