DODD-FRANK & CFPB ANNIVERSARIES

ABSTRACT: We have just reached the second anniversary of the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the first anniversary of the Consumer Financial Protection Bureau (CFPB) that it created. Much has been accomplished despite efforts of the financial industry and some in Congress to block, weaken, and/or delay progress. The CFPB, in its first major enforcement action, ordered Capital One Bank to pay $210 million to settle charges of deceptive marketing. The CFPB has received 45,000 complaints and projects over 200,000 per year. (To file a complaint go to http://www.consumerfinance.gov/complaint.)

For the Dodd-Frank law overall, it is estimated that 31% of the rule making required by the law has been finalized. This effort is extensive because Congress was unable to resolve many of the complex and controversial issues and instead passed them on to the regulators’ rulemaking process. The financial industry has been lobbying heavily (over $200 million over the last two years and 1,300 meetings with three key regulatory agencies) to delay, weaken, and complicate the rulemaking and implementation. Sheila Bair, the very effective former chair of the Federal Deposit Insurance Corporation (FDIC) writes, “we see regulators who are too timid … they try to placate industry lobbyists … We need a regulatory system focused on the public interest, not the special interest. … and Congress needs to support them.” [1]

I urge you to let your representatives in or candidates for Congress know that you support strong regulation of the financial industry and strong penalties, including jail time, for violators.

FULL POST:We have just reached the second anniversary of the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the first anniversary of the Consumer Financial Protection Bureau (CFPB) that it created. (The existence of a similar agency in Canada has been credited by some with having avoided the mortgage fraud and predatory lending that contributed to the financial and housing market collapse in the US. [2]) Much has been accomplished despite efforts of the financial industry and some in Congress to block, weaken, and/or delay progress. Most notably, Senate Republicans blocked President Obama’s appointment of anyone to head the CFPB to prevent it from functioning effectively. Obama eventually appointed a head of the CFPB in January 2012 without Senate approval when it was in recess.

The CFPB, in its first major enforcement action, ordered Capital One Bank to pay $210 million to settle charges of deceptive marketing to credit card customers. In addition, the CFPB has:

  • Engaged in lots of fact-finding and gathering of input from a wide range of constituencies
  • Undertaken its “Know Before You Owe” initiative to help people understand the consequences of debt
  • Proposed a redesign of mortgage forms to enhance disclosure and understanding
  • Started developing a range of mortgage regulations making them safer for borrowers and lenders, including a ban on balloon payments and prepayment penalties, and a cap on late fees
  • Jointly with the Education Department, issued a report on subprime-style lending in the private student loan market and created a model document on college costs and financing options [3]
  • Initiated oversight of companies reporting on individuals’ creditworthiness
  • Launched a database that tracks credit card complaints

The CFPB has received 45,000 complaints, many about credit cards and mortgages. The frequency is increasing and is projected to exceed 200,000 per year, perhaps by a lot. [4][5] (To file a complaint go to http://www.consumerfinance.gov/complaint.)

For the Dodd-Frank law overall, it is estimated that 31% of the rule making required by the law has been finalized (123 of 398 rules). To-date, 8,843 pages of rules and regulations have been created by 10 regulatory agencies. The CFPB is responsible for 1,013 of those pages and most of the 1,561 pages devoted to consumer protection. The other major contributors are the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) each with 3,200 pages and the Federal Reserve with 1,439 pages. [6] This effort is so extensive because Congress was unable to resolve many of the complex and controversial issues and instead passed them on to the regulators’ rulemaking process.

The financial industry has been lobbying heavily (over $200 million over the last two years and 1,300 meetings with three key regulatory agencies: the Treasury, the Federal Reserve, and the CFTC) to delay, weaken, and complicate the rulemaking and implementation. For example, new requirements for reserves to protect against losses won’t begin kicking in until January and won’t be fully implemented until 2019. New rules on trading of derivatives won’t start until later this year and will apply to many fewer companies than originally envisioned. The Volcker Rule, to prevent excessive, risky trading by federally insured banks, is still in the works with no draft released and nothing implemented, despite JPMorgan’s recent huge loss on such trading, estimated to be $6 billion. [7][8]

Sheila Bair, the very effective, former chair of the Federal Deposit Insurance Corporation (FDIC), writes, “Yet, still, we see regulators who are too timid … they try to placate industry lobbyists by creating this clarification or that exception, resulting in indecipherable rules that are hundreds, and in some cases, thousands of pages long. … And the irony is that once the rules have ballooned … the lobbyists who sought all the clarifications and exceptions ridicule the regulators for … red tape. … We need a regulatory system focused on the public interest, not the special interest. And we need strong, credible voices who will weigh into the debate on the side of the population at large. … The system is not getting fixed and we need to send a message to Washington. … We need regulators to write rules that the public can understand and the [bank] examiners can enforce. … and Congress needs to support them.” [9]

I hope this information and that in previous posts will help you do anything you can to support strong regulation of the financial industry. I urge you to let your representatives in or candidates for Congress know that you support strong regulation of the financial industry and strong penalties, including jail time, for violators. Tell them your personal stories about how the financial collapse has affected you and your family. Only strong grassroots pressure by voters will ultimately make the difference.


[1]       Bair, S., 7/20/12, “Two years after Dodd-Frank, why isn’t anything fixed?” Yahoo! Finance

[2]       Krugman, P., 2/1/10, “Good and boring,” The New York Times

[3]       Dougherty, C., & Lorin, J., 7/20/12, “CFPB says students victimized by ‘subprime-style’ lending,” Bloomberg Businessweek

[4]       Singletary, M., 7/11/12, “Consumer protection bureau nears its first anniversary,” The Boston Globe

[5]       Puzzanghera, J., 7/23/12, “Cordray marks consumer protection agency’s 1st year,” Los Angeles Times

[6]       Davis Polk & Wardwell LLP (law firm), 7/20/12, “Dodd-Frank progress report,” http://www.davispolk.com/dodd-frank-rulemaking-progress-report

[7]       Liberto, J., 7/21/12, “Two-thirds of Dodd-Frank still not in place,” CNN Money

[8]       Drutman, L., 7/19/12, “Big banks dominate Dodd-Frank meetings with regulators,” Sunlight Foundation

[9]       Bair, S., 7/20/12, “Two years after Dodd-Frank, why isn’t anything fixed?” Yahoo! Finance

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