CFSL Bulletin : Consumer Finance Lawyers & Attorneys for Financial Litigation & Class Action Defense

Expansive. The Consumer Financial Protection Act's ("CFPA") Bureau of Consumer Financial Protection ("Bureau") will not only be big, but it will have broad and sweeping rulemaking authority. Specifically, the Bureau's Director, once selected and confirmed, will have the power to "prescribe rules . . . as may be necessary or appropriate to enable the Bureau to administer and carry out the purposes and objectives of the Federal consumer laws, and to prevent evasions thereof." The Bureau's purpose is "ensuring that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products are services are fair, transparent, and competitive." The Bureau's objectives include exercising its authority to ensure that, among other things:

• consumers get timely and understandable information about consumer financial products;
• outdated and burdensome regulations are modified to reduce unwarranted regulatory burdens;
• the Federal consumer financial law is consistently enforced; and
• consumers are protected from discrimination, and unfair, deceptive, or abusive acts and practices.

In short, the CFPA's virtually all-encompassing rulemaking power covers almost every aspect of most consumer financial products.   

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The Dodd-Frank Wall Street Reform and Consumer Protection Act (CFPA) directly addresses its own preemptive effect on State law and amends the National Bank Act to clarify the standards that apply to national banks. The CFPA greatly increases the powers of states to make and enforce laws designed to protect consumers in financial transactions. The default preemption standard for all covered persons is conflict preemption. 

Conflict preemption occurs when a federal law is in “irreconcilable conflict” with State law. It arises when it is impossible to comply with both federal and State law or when State law stands as an obstacle to achieving some federal law objective. 

No covered person is exempt from complying with State law unless that State law is inconsistent with the CFPA and then only to the extent of the inconsistency. The CFPA specifically provides that a State law is not inconsistent if the protection given to consumers is greater than the protection provided in the statute. 

The Consumer Financial Protection Bureau (“Bureau”) has the power to determine what State laws are preempted, and we expect Courts to defer to the Bureau’s determinations as they would those of any administrative agency specifically empowered to interpret the law.

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President Obama faces growing pressure to appoint Elizabeth Warren to head the Bureau of Consumer Financial Protection, but even some Senate Democrats are wary of her nomination and Senator Dodd has already warned that she may not have the 60 votes required to avoid a filibuster on her nomination.

The White House, however, may be able to pick up Republican Senators Scott Brown of Massachusetts, Susan Collins and Olympia Snowe of Maine, and Chuck Grassley of Iowa in support of Ms. Warren.  As Noam Scheiber of The New Republic reports, the banks may not even oppose Ms. Warren if she becomes the nominee:  

for the moment, what’s interesting is the banks’ silence. Three industry officials I spoke with took care to assure me that their organizations aren’t actively opposing Warren. One defied me to find someone in the industry who was. Another reflected that, from the banks’ perspective, Warren might actually be preferable to Michael Barr, an assistant Treasury secretary who is also a leading candidate for the position.

Further complicating the matter is the upcoming midterm elections.  New York Times columnist Paul Krugman wrote in his blog today that President Obama's failure to nominate Ms. Warren may have significant repercussions for the upcoming midterm elections: 

Leave aside the merits of appointing Warren, which are considerable, and think about the politics. At this point, not appointing Warren would be seen by the base as a slap in the face, and would seriously dampen enthusiasm going into the midterms. And Democrats need every bit of enthusiasm they can muster to avoid a Republican takeover of the House.

Not surprisingly, the White House is taking its time and no selection appears imminent at this time. 

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Title X of the Dodd-Frank Act creates a new comprehensive statutory framework and federal regulatory watchdog to deal with the offering and provision of consumer financial products or services.  There is little doubt that this legislation will have a major impact on the financial industry going forward.  To learn more, join the August 2, 2010 Web conference "Consumer Financial Protection Act: What Lenders Need to Know." 

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The White House has posted its Top 10 list of things you may not know about the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).  The list, in its entirety, is as follows:

• Stronger protections for consumers against unfair credit card practices like rate hikes for existing credit card balances.

• Mortgage brokers will be prohibited from making higher commissions by selling mortgages they know consumers can’t afford.

• Free annual credit scores so people can stay on top of their finances. [Clarification: free credit scores are available if you receive worse terms on a loan because of something on your credit report, or if you are rejected.]

• No more taxpayer-funded bailouts. If a company can’t make it, it will have to liquidate. 

• Greater input by company shareholders over how much a CEO gets paid.  And companies’ compensation boards are now required to be truly independent.

• Brokers who offer investment advice will have to act in the best interests of their customers, not their own financial interests.

• Financial firms won't be allowed to grow so large that if one fails, it will affect the entire financial system. 

• There will be one agency whose sole job is to make sure that consumers get the protections they deserve and to set clear rules to hold banks, mortgage companies, payday lenders, and credit card lenders accountable.

• Businesses can't be charged extra fees for debit card “swipe fees” that exceed the cost of processing transactions.

• You can learn plenty more here at WhiteHouse,gov or at financialstability.gov.

In addition, the White House has produced a slick new animated feature to explain the reforms.  Check it out:

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With the passage and signing of the omnibus Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), a new era of financial regulation has been born. The 2,300 plus pages of new legislation will forever change the way financial services companies do business in the United States (and elsewhere). With that in mind, the CFSL Bulletin will publish a series of articles reviewing the 429 pages of Title X of the Dodd-Frank Act, also known as the Consumer Financial Protection Act of 2010 (CFPA). The series begins with a detailed overview of the Bureau of Consumer Financial Protection (Bureau), the new primary regulator with authority over consumer financial products and virtually every federal consumer financial protection statute. Specifically, this installment will address: 

1. The CFPA's Effective Date;
2. The Bureau's Limitations;
3. The Structure of the Bureau;
4. The Bureau's Rulemaking Authority; and
5. The Bureau's Supervisory Authority.

Subsequent articles will focus on the CFPA's provisions addressing preemption, enforcement, regulatory improvements, and federal consumer financial protection statutory amendments. 

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Now that the financial reform bill has been signed into law, the debate has shifted to who will lead the Bureau of Consumer Financial Protection (the "Bureau").  The Bureau will have the power, among other things, to write and enforce rules related to consumer financial services. 

A short-list of three candidates has emerged: Elizabeth Warren, a Harvard Law professor and head of the TARP oversight committee; Michael S. Barr, an assistant Treasury Secretary; and Eugene I. Kimmelman, a deputy assistant attorney general in the antitrust division of the Department of Justice. 

Of these, the most famous is Warren, who became the most vocal proponent of the Bureau.  Nevertheless, she has reportedly ruffled some feathers along the way, including Treasury Secretary Timothy Geithner, who has refused to endorse Warren to lead the Bureau.  If nominated, she will also have a tough confirmation battle in front of her as the Democrats may not have the votes necessary to overcome a filibuster. 

We will be closely following this story in the coming weeks. 

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Jim Puzzanghera of the Los Angeles Times reports that the President has signed the Dodd-Frank Act.  With the enactment of this sweeping financial overhaul legislation comes the birth of the Bureau of Consumer Financial Protection -- a new and principal regulator which will oversee consumer financial products and virtually every consumer financial protection statute.  In the coming days, the CFSL Bulletin will be present a series of articles on the new Act, and the structure and power of the Bureau.  Stay tuned...

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