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The New Consumer Financial Protection Bureau, Consumers, and Consumer Educators

The New Consumer Financial Protection Bureau, Consumers, and Consumer Educators. Jeanne M. Hogarth Division of Consumer & Community Affairs Federal Reserve Board

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The New Consumer Financial Protection Bureau, Consumers, and Consumer Educators

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  1. The New Consumer Financial Protection Bureau, Consumers, and Consumer Educators Jeanne M. Hogarth Division of Consumer & Community Affairs Federal Reserve Board The analysis and conclusions set forth in this presentation represent the work of the authors and do not indicate concurrence of the Federal Reserve Board, the Federal Reserve Banks, or their staff. Mention or display of a trademark, proprietary product, or firm in the presentation by the authors does not constitute an endorsement or criticism by the Federal Reserve System and does not imply approval to the exclusion of other suitable products or firms.

  2. Please note • The slides for this webinar were accurate as of Sept. 16, 2010 but the environment is very dynamic – the new Bureau is evolving daily • Since the webinar, the date of transfer has been announced (July 21, 2011) and Pres. Obama has appointed Elizabeth Warren as a special advisor to work on setting up the Bureau

  3. Dodd-Frank Wall Street Reform and Consumer Protection Act • 16 Titles, 848 pages, 533 new regulations, 60 studies, 94 reports • Focus on • Title 10 – CFPB • Title 12 – Financial access • Title 14 – Mortgage reform

  4. Sources of information • Dept. of Treasury Financial Stability website • www.financialstability.gov/roadtostability/facts.htm

  5. Sources of information • Dept. of Treasury Financial Stability website • www.financialstability.gov/roadtostability/facts.htm • Congressional Research Service • www.crs.loc.gov • GPO – copy of Act • www.gpo.gov/fdsys/pkg/BILLS-111hr4173ENR/pdf/BILLS-111hr4173ENR.pdf

  6. Who is involved? • All 5 federal financial regulators • Board, FDIC, NCUA, OCC, OTS • Treasury • FTC • SEC • CFTC • HUD • Veterans Affairs • USDA • Rural Housing Services • GAO • Comptroller General

  7. CFPB responsibilities • Independent within the Federal Reserve • Supervision • Compliance with consumer regulations • Financial institutions over $10 billion • Enforcement • Rule-writing

  8. What is covered? • Deposit taking • Mortgages • Credit cards & other loans • Loan servicing • Check guaranteeing • Collection of consumer report data • Debt collection • Real estate settlement • Money transmitting • Financial data processing

  9. What financial institutions are covered? • Deposit institutions • Non-depository institutions • Mortgage-related activities • Private student loans • Payday lending • “engaging in conduct that poses risk to consumers with regard to offering or provision of consumer financial products or services”

  10. Who’s not covered? • Merchants, retailers, sellers of nonfinancial goods & services • Automobile dealers • Insurance • Real estate brokers & agents • Sellers of manufactured housing • Income tax preparers • Accountants • Employee benefit plans

  11. What laws are transferred? • Unfair & Deceptive Acts & Practices • Truth in Lending • E.g., Fair Credit Billing, Consumer Leasing, etc. • Mortgage-related acts: • E.g. HOEPA, HMDA, Home Owners Protection Act, Alternative Mortgage Transaction Parity, etc. • Real Estate Settlement Procedures Act • Electronic Funds Transfer Act (some parts) • Truth in Savings • Equal Credit Opportunity Act • Fair Debt Collection Practices Act • Fair Credit Reporting Act

  12. What else will be in the CFPB? • Units for • Research • Consumer complaints • Community affairs • Traditionally underserved areas (LMI) • Ombudsman for private student loans • Consumer Financial Civil Penalty Fund • Pays victims • Funds financial literacy & consumer education programs

  13. What else will be in the CFPB? • Offices of • Fair Lending & Equal Opportunity (Assistant Director) • Financial Protection for Older Americans (Assistant Director) • Financial Education • Service Member Affairs

  14. Research unit & opportunities • Unit charged with studying • Market developments • Access to fair & affordable credit • Consumer awareness & use of disclosures • Consumer awareness of costs • Consumer behavior with respect to products & services • Experiences of underserved

  15. Research unit & opportunities • Consumer testing requirement for all model disclosure forms • Work with Financial Education to “conduct research related to consumer financial education & counseling” • Work with Financial Protection for Older Americans to identify best practices for education & counseling of seniors, long-term savings, retirement planning

  16. Office of Financial Education • “. . . developing & implementing initiatives to educate and empower consumer to make better informed financial decisions.” • Specific charges – “opportunities for consumers to access. . .” • Financial counseling • Information to evaluate credit • Savings, borrowing, & services at mainstream financial institutions • Prepare for educational expenses • Help with long term savings • Wealth building during tax prep. (EITC)

  17. Comptroller General Studies • Certification for persons providing financial education • Potential certification process & standards for certification • Recognition of outstanding programs • Certifying entities • Funding resources • Cost benefit-analysis

  18. Comptroller General Studies • Technological resources needed to collect, evaluate, or promote literacy & counseling programs • Effective methods for financial education • Recommendations to improve financial education outcomes & empower consumers to make better financial decisions

  19. Service Member Affairs • Educate & empower service members & families • Monitor complaints of SMs • Coordinate with state & federal agencies on consumer protection • Set up regional offices • Set up MOU with DOD

  20. Financial Protection for Older Americans • Within 6 months of transfer • Facilitate financial literacy • Protect from unfair, deceptive & abusive acts • Goals for programs for • Recognizing unfair/deceptive • Counseling, including long term savings • Providing personal credit advocacy

  21. Financial Protection for Older Americans • Monitor certifications for those who advise seniors • Report on best practices for • Disseminating information on certification of financial advisors for seniors • Identifying appropriate financial advisors • Verifying credentials of advisors

  22. Financial Protection for Older Americans • Research best practices to educate seniors on • Avoiding unfair, deceptive & abusive practices • Planning for retirement & long-term care • Long-term savings • Coordinate with state agencies • Work with community organizations

  23. New regulations & model disclosures • Plain language • Clear format • Succinctly explains information • Validated through consumer testing • Option for trial disclosures designed to improve model forms • Combined TILA-RESPA disclosure for mortgages

  24. Regulatory improvements • Small business loan data collection • Remittance disclosures (including expanded ACH facilities) • Reasonable fees and rules for payment card transactions (interchange fees) • Report on private education loans & lenders • Study & report on credit scores

  25. Title 12 – Improving Access to Mainstream Financial Institutions • Treasury authorized to establish grants & agreements • Help LMI individuals establish accounts • Improve access to accounts • Treasury authorized to establish demonstration programs on small dollar loans

  26. Title 14 – Mortgage Reform & Anti-Predatory Lending Act • Prohibits steering incentives • Establishes an ability to pay requirement • Prohibits single premium credit insurance • Limits negative amortization mortgages • Notice requirements for rate adjustments

  27. Title 14 – Mortgage Reform & Anti-Predatory Lending Act • Establishes an Office of Housing Counseling within HUD • Headed by Director • Establishes advisory committee • Requires CFPB to produce a booklet to help consumers understand mortgages & settlement services • Highly detailed list of contents required

  28. Title 14 – Mortgage Reform & Anti-Predatory Lending Act • New provisions for mortgage servicing • Escrow accounts under TILA • RESPA amendments • Appraisal activities & fees regulated • Funds for neighborhood stabilization

  29. What happens next? • Announce transfer date • Nomination of director • “. . .from date of enactment” vs “….from date of transfer”

  30. What happens next? • Job announcement for CFPB economists at • www.usajobs.gov • www.treas.gov/organization/employment/

  31. Thank you!Any questions?

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