Consumer Financial Protection Bureau celebrates first birthday; consumers have much to celebrate

The Consumer Financial Protection Bureau (CFPB) just celebrated its first birthday, and consumers have much to celebrate.

Finally there's a sharp-toothed government watchdog for consumers, on the lookout for the types of shenanigans that contributed to the financial crisis. Its rulemaking and enforcement power kicked in on Thursday, one year after it was created as part of the Wall Street reform law.

The mission of the bureau is to educate consumers, regulate financial institutions such as banks and study consumer financial markets.

Harvard law professor and bankruptcy expert Elizabeth Warren acted as the chief architect for the new bureau. She broke the mold of a traditional regulator. She recorded video messages to the public on YouTube, asked for feedback on prototypes for new mortgage disclosure forms and used the roughly 13,000 comments received to make changes. She even made her calendar available for all to see who she spent her days meeting with -- bankers and consumers alike -- at www.consumerfinance.gov.

But she rubbed some Republicans and bankers the wrong way, and was passed over for the permanent gig last week despite being supremely qualified for the job. Former Ohio Attorney General Richard Cordray, currently working at the bureau under Warren, received President Obama's nod. He still needs to be confirmed by Congress.

Now that the bureau has received its wrist-slapping ruler, what should its priorities be?

For the groups that will be regulated by the new agency, a smooth transition from the current system is on their minds. Beyond that, Mark Schiffman, spokesman for ACA International, a debt collectors association in Edina, is looking forward to working with the bureau to modernize the Fair Debt Collection Practices Act, "so that debt collectors can communicate with consumers using technologies now available, which were never imagined in 1978 when the FDCPA was adopted."

The heads of both banking associations in Minnesota requested the same thing -- less focus on banks and more on what Minnesota Bankers Association President Joe Witt calls "the unregulated non-banks." Witt explains: "The typical Minnesota bank is heavily regulated. Most of the subprime loans that led to the crisis were originated by non-banks like finance companies and mortgage brokers. Rather than re-regulating the banks, we hope the new CFPB focuses on regulating the unregulated."

Consumer advocates have their own wish list. Most requested more consumer education, descriptions of financial products written in clear terms, and a close look at the mortgage servicing issues that have been in the news.

"My wish list is they start off with some issues that highlight the power of setting fair rules of the marketplace," said Prentiss Cox, University of Minnesota law professor and former Minnesota assistant attorney general. He mentioned so-called "pre-acquired account marketing," the practice of one company charging a consumer for a service by receiving credit account information from another company where the consumer did business, rather than directly from that person. "The result is a gigantic multibillion-dollar scam which heavily affects the elderly and immigrants," Cox complained.

Mark Kantrowitz, publisher of Finaid.org, wrote a four-page paper detailing how the bureau should oversee the private student loan industry. My favorites include requiring private student loans to be certified by colleges instead of sold directly to students, and allow private loans to be discharged in bankruptcy.

Minneapolis consumer attorney Sam Glover would like to see the elimination of mandatory binding arbitration clauses, which are included in many consumer contracts. He calls mandatory arbitration "patently unfair" to consumers. "But since it is cheaper for the corporations, they love mandatory binding arbitration," Glover said.

Parker Wheatley studies financial markets and low-income consumers as an economics professor at St. John's University. "I would like to see the CFPB ... work to balance access to credit against the deleterious effects of extremely high interest rates on household finances."

Wheatley is referring to payday loans and other alternative financial products. I also loved his suggestion that the bureau create warning labels to place on financial products such as payday loans. "If consumers are presented with information on repayment rates and long-term indebtedness that occurs for some borrowers of such products, they might use them a bit more judiciously."

Last but not least, Ron Elwood, a supervising attorney with the Legal Services Advocacy Project in St. Paul, would like to see the bureau continue its work on simplifying fine-print disclosures on mortgages, credit cards and other consumer loans.

But his first wish for the bureau -- shared with me during a week when the House of Representatives voted to overhaul the structure and powers of the consumer watchdog -- is for it to merely survive: "Incredibly, so soon after the country was brought to its knees because there was no such entity minding the financial store ... the CFPB is under attack," Elwood said. "My first priority is that it lives to fulfill its mission to protect consumers and ensure that a financial meltdown like the one we recently experienced never happens again."

What would you like to see from the Consumer Financial Protection Bureau? Tell Kara McGuire • 612-673-7293 or kmcguire@startribune.com. Twitter: @Kara_McGuire