5 Things You Should Know About the New Consumer Watchdog

Last July, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.  This landmark legislation has helped create a much needed independent consumer watchdog, the Consumer Financial Protection Bureau (CFPB).

Although the agency is in the embryonic stage of development, its upcoming regulatory decisions will affect each and every American.  Here’s what you need to know:

1. The CFPB’s sole job is to look out for you, the consumer.  It is responsible for making sure consumers get the protections they deserve by setting clear rules to hold banks, mortgage companies, payday lenders, and credit card lenders accountable. Once the agency is up and running, the CFPB will have broad rulemaking authority to actively monitor and regulate business practices that it deems deceptive, abusive or unfair.
2. Established as part of the larger financial reform package signed into law in July 2010, the CFPB will be up and running by next July.  Elizabeth Warren, a former Harvard Law professor, was chosen to help set up the Bureau, but government officials say she’s just a placeholder until President Obama nominates an official chairperson.
3. The CFPB will streamline and consolidate consumer protection rulemaking by taking on responsibilities from already-existing entities like Federal Trade Commission.
4. While the CFPB can regulate most financial institutions, it doesn’t have authority to regulate the financial practices of the automotive industry.  So if you go to a dealership to buy a car, beware of their financing, as they are not and will not be regulated by the Bureau.
5. We can expect to see simplified disclosure documents and product terms and conditions.  This means you will have better information when making important financial decisions.

The formation of the Consumer Financial Protection Bureau represents a significant victory for American consumers – but don’t start celebrating just yet.  Although the CFPB has broad authority to regulate financial industry practices, a bold and independent leader is needed to ensure the agency uses its power to protect the interest of American consumers.  Until we know who will head the CFPB, we will continue to face more questions than answers about the Bureau’s priorities. Senator Chris Dodd, the architect of the financial reform package, claims that President Obama’s nomination will be made soon, so stay tuned.

In the meantime, check out this great video from the White House on what Wall Street reform means for you!

Until next week,

Sunaena Chhatry
Senior Policy Associate

Photo credit: norwichnuts