Consumer Agency at 2: More Growing Pains Ahead
Policy + Politics

Consumer Agency at 2: More Growing Pains Ahead

REUTERS/Joshua Roberts

Since the Consumer Financial Protection Bureau (CFPB) was formed two years ago under the Dodd-Frank Act, Democrats and Republicans have disagreed about its raison d'etre.

Democrats say it's an effective financial watchdog, while Republicans say it wields too much power. But how well has the bureau actually performed since it's been around?

The Bipartisan Policy Center today released a report examining the CFPB's first two years. For a 1,200-person start-up, the bureau is doing OK, according to the centrist D.C. think tank. But it still has a long way to go.

The report praised the CFPB, tasked with issuing financial regulations, for several new rules, specifically those governing mortgage lending. It said the agency is most effective when consumer groups and industry groups are able to give feedback.

However, it also said the agency needs to improve the way it collects data from consumers, as well as how it issues guidelines, among other things.

"The Bureau has taken an open and thoughtful approach to rulemaking, which will be important to continue .... However, there are areas where the Bureau can do more to help consumers including investing in and regulating activities among non-banks and spending additional time and resources to investigate, authenticate, and remedy consumer complaints," said Eric Rodriguez, vice president of the National Council of La Raza, a Latino advocacy group and a co-author of the report.

The report lists 30 recommendations, including being more open to public feedback, responding in a more timely fashion to deadlines, and being more transparent.

"Where they're open and transparent, they have a high success rate.... Where they develop guidance internally without the benefit of stakeholders, it's more problematic," said Rick Fischer, co-author of the report and a lawyer for Morrison & Foerster LP.

The report is the second of five white papers the BPC is releasing on the Dodd-Frank Act implementation. The Government Accountability Office is also in the process of examining how the bureau collects its data, an area the Bipartisan Policy Center's report says needs improvement.

Here are several key recommendations:

1) Develop a performance tracking process. The bureau should create a way to track regulatory actions, meet timelines and measure staff turnover to assess more accurately overall performance.

2) Seek more public feedback. The bureau should use an interactive, transparent process more often – rather than issuing guidance based on internal deliberations alone. "The more public consultation in which the CFPB engages in developing policies, the better those policies have been," says the report.

3) Speed up inspections Earlier this summer, Consumer Bankers Association CEO Richard Hunt said the CFPB's team that examines banks is understaffed, and takes too much time to tell banks how they scored on routine audits. The report suggests the process would move faster if enforcement attorneys don't attend routine examinations of the financial firms since it "stunts the flow of information" and limits the bureau's effectiveness.

4) Focus on nonbank providers of financial products and services. Due to rule-writing obligations that Congress mandated under Dodd-Frank, the bureau's time and attention has been absorbed by bank regulation. But "now that most of those mandates have been addressed," the report said, "the CFPB should focus additional attention" on nonbank providers.

5) Beef up data security. The bureau should improve security within its data collection process since consumers could be harmed if data breaches occur. 6) Make a complaint portal more transparent. The online tool that allows consumers to submit complaints should clarify which complaints have been verified by the agency – in the interest of more transparency.

6)  Make a complaint portal more transparent.  The online tool that allows consumers to submit complaints should clarify which complaints have been verified by the agency – in the interest of more transparency.