Makin' Money

The Czar

Chris Farrell Nov 10, 2010

Elizabeth Warren is the czar of the new Consumer Financial Protection Board. It’s a controversial agency, although I don’t understand why. Plain vanilla finance and better informed consumer is good for customers. It will also drive down profits at many firms with a business model that relies on deceiving and manipulating consumers. And the problem is….?

Anyway, she recently held a conference call with personal finance reporters from around the country. The interesting part–the question and answer session–was unfortunately off the record. But she read a statement on the record:

ELIZABETH WARREN: We’ve all been working around the clock since I came on board to get the new consumer agency up and running. Since I started, we’ve doubled the size of our staff and we’ve setup temporary headquarters in office space in downtown Washington.

I’ve met with CEOs from the largest financial institutions in the country, and I’ve visited with community bankers from Columbus, Ohio to California. In fact, my first meeting on my very first day was with a group of community bankers from my home state of Oklahoma.

I’m also meeting with consumer advocates across the country. I’m committed to hearing from the people working on the ground in the consumer credit market–the discussions I’ve had with housing counselors, consumer advocates and leaders in the non-profit world are informing all of the work we’re doing here.

The organizational design and infrastructure questions are important, but I want to use this time to talk about how this agency is going to make a difference for American families. On that point, I’m focusing on three priorities:

The first two priorities are the consumer credit products that families deal with nearly every day, credit cards and home mortgages.

The consumer agency will make it easier for a family to see the costs and risks of a mortgage upfront and will give them the tools to make the choice that is right for them. A mortgage is the biggest financial commitment most Americans will make in a lifetime. But getting stuck with the wrong mortgage can cost a family tens of thousands of dollars over the life of the loan, and could cost them their home.

Second, the consumer agency will cut down the fine print in credit card agreements, empowering consumers to make direct comparisons between products and restoring competition. Almost four out of every five families now have a credit card, and almost half of those families carry a balance. When there is no fine print, there are no surprises for consumers. We know that if the costs are clear, some people will dial back the risks, purchase less, and some will decide to use a different payment method.

Finally, the CFPB is the first 21st century consumer agency, and it will be a cop on the beat making sure lenders are playing by the rules. We’re not building a new regulatory agency in the era of the typewriter and broadcast television, we’re building the consumer agency in the age of iPhones and the Internet.

The American people interact with each other, with government, and with their finances in different ways than they did 20 or 30 years ago. Technology allows us to use information to make the agency perform better. To give you an example, we can use technology to tap directly into the experiences of millions of Americans to develop a rapid-response approach to policing credit markets.

That’s what American families can expect to see from this new consumer agency: the ability to make direct comparisons when they shop for mortgages and credit cards, so families can make the choices that are best for them. We also will be a government agency that puts a cop on the beat to patrol the boundaries of the consumer credit market, and that also works every day for American families, using technology to make that work efficient and effective.

None of this will happen overnight. Before any rules are issued, any banks are monitored, or any enforcement actions begin, the CFPB implementation team will need to take many preliminary steps and lay a considerable amount of groundwork. Next July, the CFPB will get authority under more than a dozen existing consumer financial protection laws to issue and enforce rules – but right now we’re focusing on building the foundation to serve American families.

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