Compliance Blog

Written by Steve Van Beek

Building of yesterday's post about regulatory uncertainty, I wanted to zero in on how the CFPB's authority is impacted if it does not have a Senate-confirmed Director by the "designated transfer date" - one month from now on July 21, 2011.  

Perhaps the best starting point is to look at how the CFPB views its own powers after July 21, 2011 if it is still operating without a Director.  A January 10, 2011 joint letter from the Inspector Generals of the Federal Reserve and Treasury Department reviews Dodd-Frank and gives their interpretation.  Question and Answer 5 directly addresses which powers the CFPB will obtain on July 21, 2011 even without a confirmed Director.  According to the Inspector Generals, these powers can be performed by the Treasury - including Special Advisor Elizabeth Warren - after July 21, 2011.

Even without a Director, the CFPB can (among other powers):

• Write rules, orders and guidance regarding any of the consumer laws that transfer to the CFPB.  This includes proposing new regulations as well as finalizing regulations (both its own and proposals it inherits from other agencies);
• Conduct examinations of and issue and enforce orders against banks, savings associations or credit unions with assets of greater than $10 billion; and
• Take over consumer protection issues related to RESPA and certain consumer rules previously under the authority of the Federal Trade Commission. 

The joint letter also discusses which powers cannot be exercised by the CFPB until it has a Director.  These powers were newly-established under Dodd-Frank and cannot be exercised by the Treasury using its interim authority.  The CFPB cannot exercise these powers until it has a Director.  However, keep in mind that existing regulators have some concurrent authority - such as for determining unfair and deceptive practices - and we could still see some action in these areas.

The newly-created powers come from Sections 1022, 1024 and Title X, Subtitle C of Dodd-Frank and include:

• Prohibiting unfair, deceptive, or abusive acts or practices (Subtitle C);
• Drafting and finalizing disclosure requirements and accompanying model forms to ensure clear and accurate disclosures (Subtitle C); and
• Determining which nondepository institutions should be under the CFPB's authority (Section 1022) and supervising those nondepository institutions - including rules and examination (Section 1024).

Even though the CFPB may not be able to fully perform these new powers, it is likely the CFPB will continue to conduct research and analyze which areas to focus on.  For example, these provisions would not prevent the CFPB from conducting consumer testing on new model disclosure forms.  In other words, the lack of a Senate-confirmed Director may not slow down the CFPB's new activities.  And, the Inspector Generals' letter specifically indicates that Treasury will be able to both propose and finalize new regulations without a Director.

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NAFCU will host an August 10 webcast on the new Credit CARD Act clarifications issued in March by the Federal Reserve.  Sarah and I will discuss these new clarifications and their impact on credit unions.  We will also address how some of these clarifications will impact not only credit card accounts but also all open-end lending.  We will also give a refresher on change-in-terms and renewal notices for credit card accounts.  Additional details are available here.