CFPB Soon to Open Its Doors Without a Director

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 07 July 2011

In two weeks, we will celebrate the one year anniversary of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).  Despite the enormous opposition from the financial industry, Congress passed this landmark legislation that represents a victory for all American consumers.  NACA’s Legislative Unit is dedicating the month of July’s blog posts to celebrating the anniversary of this important law.

Perhaps the most significant provision of the Dodd-Frank Act is the one that creates the Consumer Financial Protection Bureau (CFPB). Now consumers have a single agency whose job it is to guard against unscrupulous, unfair, deceptive and abusive practices. 

While the CFPB officially opens for business on July 21, 2011, the agency has been working for months to improve and simplify the type of information consumers get from financial institutions so that they can make an informed decision on financial products like a credit card application or a mortgage form.  It is also working diligently to put systems in place and to hire qualified people to run the agency.

Yet one very important position has not been filled since the law’s enactment a year ago – the CFPB director.  One would think the person that first came up with the idea of a consumer financial agency and who passionately fought for consumers’ rights as the head of the Congressional Panel on TARP would make the most sense to nominate for the position.  If that were the case then Professor Elizabeth Warren would have been nominated as the CFPB’s director months ago.  Last September, President Obama named Professor Warren as Assistant to the President and Special Advisor to the Secretary of the Treasury on the CFPB, but he has yet to nominate her as the director.

Instead the banking lobby continues to fight hard to prevent the appointment of Warren.  The opposition is not only coming from industry representatives but equally as hard from the GOP on the Hill.  Forty-four out of forty-seven Senate Republicans signed a letter sent to President Obama announcing that they neither want Professor Warren, nor will they agree to the appointment of any director without significantly changing the powers, structure and funding mechanisms for the CFPB.  At this point it seems the best chance for Warren or any director to run the CFPB is if President Obama makes a recess appointment, and Senate and House Republicans have vowed to try to stop that as well.

The Senate remained in pro forma session this week, instead of adjourning for the July 4th recess.  The Senate did not officially adjourn for the Memorial Day recess either.  The House must approve a Senate recess of more than three days.  While this is usually not a controversial procedure, Republicans in the House and Senate have asked for House Speaker John Boehner (R-Ohio) to refuse to approve a Senate recess, which potentially blocks President Obama from making recess appointments.  However, the Constitution gives the president the power to adjourn either chamber in the case of disagreement between them.  Yet, Democrats seem reluctant to use that power.  It appears the Democrats are resigned to avoid a partisan procedural fight over the issue.  The failure to adjourn leaves the question of what is to come for the August recess.

Meanwhile in the absence of a director, the CFPB’s full authority is on hold regarding the oversight of payday lenders, mortgage brokers, private student lenders and other types of financial predators that for years have been targeting consumers and military personnel as well as their families.

The mission of the CFPB is too important to continue to be delayed by the partisan power struggle overshadowing the debate over a director.

Click here to sign an Americans for Financial Reform petition urging President Obama to nominate Warren to lead the CFPB, and the Senate to confirm her.

Ellen M. Taverna
Legislative Associate, National Association of Consumer Advocates (NACA)