What we should expect from the Consumer Financial Protection Bureau
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TEXT OF INTERVIEW
Tess Vigeland: Elizabeth Warren made her first official appearance this week as White House adviser to the new Consumer Financial Protection Bureau. She spoke about simplifying the home mortgage process at a Treasury Department forum.
The bureau has a lot on its plate, so we asked two consumer advocates to join us and give us their two cents on what the CFPB should tackle first.
Travis Plunkett is with the Consumer Federation of America. Hello.
Travis Plunkett: Hi there.
VIGELAND: And Kathleen Day is with the Center for Responsible Lending. Welcome to the program.
Kathleen Day: Thank you for having me.
VIGELAND: Let me ask each of you first, and perhaps Travis you can take the lead here: give me what you think is the number one objective that you would like to see this agency tackle immediately.
PLUNKETT: Perhaps the biggest objective will be to make the mortgage market safe for all participants, because we know that the mortgage problem spread to the housing market and to the economy. But there are also serious problems for consumers with credit cards, with overdraft loans, private student loans, the list goes on and on.
VIGELAND: And you know, they actually got started on the mortgage issue this week. There was a panel put together by the Treasury Dept. and it looks like their main objective there is going to be the getting paperwork down.
DAY: You mean the disclosures on the paperwork.
DAY: And that is important, but as they cautioned, that’s a first step but it is by no means, enough.
VIGELAND: Kathleen, what would you like to see as the number one priority?
DAY: Well there’s so many to choose from. But two top ones would be making mortgage disclosure forms understandable. The other thing that’s very, very important is to devise and make clear to the public how they can complain about what they think as an abusive practice, and making that public so that everyone else can see it as well.
VIGELAND: It does seem like it’s fairly complicated to figure out right now who you’re supposed to write to, who you’re supposed to complain to.
DAY: Right. So that has to be the first order, one of the first orders.
PLUNKETT: We should also mention the confusing array of federal regulators — it’s not only hard for the consumers to know who to complain to; they largely have failed to satisfy many of the consumers who have complained. One office is infamous for not really providing any assistance to the consumers who are having problems with their banks. What they do is they forward the complaint to the bank that was the problem in the first place.
VIGELAND: One of the other pet causes for Elizabeth Warren — who’s now going to be tackling this agency — has been credit cards. And she very instrumental in helping to persuade Congress to get the credit card reform act passed. But a lot of people are not satisifed with that. What do you thinking you would like to see on the credit front? Travis?
PLUNKETT: The first thing would be to enforce the new card act. We’ve got some evidence now that some credit card companies are either evading the spirit of the law, or actually violating — evading — the letter of the law.
VIGELAND: Would this bureau be able to do something about that?
DAY: The bureau’s going to have the ability to assess fines and also look at the books of the credit card companies. They’ll have several tools at its disposal.
VIGELAND: And Kathleen Day, of course of The Center for Responsible Lending, I assume credit is high on your list as well.
DAY: Yes, and I would like to mention another abuse. The new credit card rules do not apply to small businesses. So now we’ve heard of situations where credit card companies are sending individual consumers credit cards that they’re labeling small business cards, and in that way trying to make an endrun around the rules.
VIGELAND: Travis, what about student loans? That is probably the question that we get most often here on the show — how do I get help with my student loan debt? What can or should the bureau do to help consumers on that front?
PLUNKETT: First, prohibit lenders from pushing students to take on more expensive and riskier private loans without first exhausting their federal aid. And then we have a lot of predatory lending still by these proprietary schools, they’re trade schools.
PLUNKETT: For-profit, and they often — not always — encourage to take on far more debt than they can pay off.
DAY: And for a degree that then doesn’t really deliver what the for-profit school promised.
VIGELAND: You know one criticism that we’ve talked about on the show before is that in the process of setting up all these increased protections for consumers, that there’s the possibility that you could prevent very knowledgeable, very saavy people from investing the way that they see fit. They are aware of the risks, they’re willing to take them. Can I get your thoughts on that argument?
PLUNKETT: People like me believe that some creditors have made credit far more complex than they need to. To the point where consumers, even very well-educated consumers, can’t really understand what’s going to happen. What we’d like to see is the agencies saying, here are the products that are sort of standard, that are safe. And then if financial service providers want to offer trickier, more complex credit products, then the agency should say, the risk is higher here, so we’re going to put some new requirements on you to make sure that you tell them about that risk, that you don’t mislead them and there’s going to be more legal liability if you mess up.
DAY: Well let’s not forget that every time anyone proposes some common sense rules in the lending industry, they trot out two scare tactics: one is credit will become scarcer and it will be fewer choices. These companies want customers, they want to lend and they want to make money on it. The point of these rules is to make sure that it’s not set with so many tricks and traps that the customer has no idea what’s going on.
VIGELAND: Well the bureau certainly has its work cut out for it. We will check back with you perhaps in a few months and see how things are going. Travis Plunkett is with the Consumer Federation of America. Kathleen Day is with The Center for Responsible Lending. Thank you both for joining us.
PLUNKETT: Nice to be with you.
DAY: Thank you.
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