Consumers to get a financial ‘beat cop’

WASHINGTON – The most tangible government reform to grow out of the Great Recession officially goes live this week when the Consumer Financial Protection Bureau assumes its regulatory authority on Thursday.

Created by the sweeping Dodd-Frank financial overhaul bill last summer, the bureau will serve as America’s “beat cop” against deceptive, abusive and predatory loan products in the financial marketplace.

“This agency was created one year ago to stand up for consumers, and we are ready to get to work,” said Elizabeth Warren, the assistant to the president who championed the agency’s creation and has led efforts to set it up.

The bureau marks a significant triumph for consumer advocates who’ve waged a largely uphill battle trying to get the financial industry to adopt even modest reforms to help protect consumers. Many say the fight just got a little easier.

Much as the Environmental Protection Agency consolidated federal efforts against air, water and land pollution in the 1970s, the new consumer bureau will enforce nearly 20 federal consumer finance laws previously handled by seven agencies.

That splintered enforcement left regulators slow to respond as dangerous loan products entered the marketplace, helping to precipitate the nation’s housing collapse in 2008.

The new bureau, while a division of the Federal Reserve, will work as a stand-alone agency to make sure customers know the terms of loan products by cutting the fine print, simplifying forms and helping to illuminate costly penalties and fees that often are hidden.

Safer credit cards, student loans and mortgages – with the risks and costs clearly delineated – will allow consumers to make more educated choices and comparison shop for the best deals. The bureau already is working to condense two federal mortgage disclosure forms into one.

The agency was Warren’s dream. Many hoped she’d become its first director. But after Warren drew strong opposition from congressional Republicans and finance lobbyists, President Barack Obama on Monday nominated former Ohio Attorney General Richard Cordray to head the bureau. Warren previously had selected Cordray to help her run the agency.

Some 44 Senate Republicans signed a letter in May vowing to block any nominee for director unless the agency’s structure is revamped. If they hold firm, that’s enough to block Cordray’s Senate confirmation. And under the Dodd-Frank law, many of the agency’s powers cannot be executed until a director is confirmed – so the GOP stand threatens to cripple the new consumer champion at birth.

On Monday, Senate Minority Leader Mitch McConnell, R-Ky., said the bureau “represents a government-driven solution to a problem government helped create.”