If your credit union's alarm bells are not clanging and the sirens aren't wailing, then you must not be paying attention - your credit union is about to be robbed of the freedom to set its own direction. In recent days, President Barack Obama designated the liberal blogosphere-championed Harvard bankruptcy law professor Elizabeth Warren to launch the new Consumer Financial Protection Bureau. Rather than appoint controversial activist Warren as the statutorily-defined director of the bureau, the President side-stepped the U.S. Senate confirmation process by designating her as Assistant to the President and Special Advisor to the Secretary of the Treasury on the CFPB. Reportedly, in her new role Warren will recruit staff for the agency, set the policy mission, and serve as the public face for the CFPB.
U.S. Treasury Secretary Timothy Geithner, who under the Dodd-Frank regulatory reform law runs the powerful new agency until an official director is appointed and confirmed, has set July 21, 2011 as the day the CFPB takes over consumer compliance rulemaking and enforcement for credit unions, banks, and non-banks. However, the President has left no doubt that confrontational ideologue Warren is the one in charge.
Putting aside her unorthodox selection process, having Warren molding the powerful new agency that has the authority to prohibit financial product offerings and control prices confirms my worst big government nightmares. Like many other financial services industry executives who have been following the CFPB saga, I had hoped that the unwanted agency's leader would not be a partisan activist, but rather someone who would work effectively with all constituencies - including the industry and the other regulatory agencies. With her frequent accusations of financial services providers' "tricks and traps" and her punitive crusade against traditional banking "bullies," she is expected to act more like a rogue cop with a chip on her shoulder than as an even-handed and fair referee in a complicated marketplace.
Credit unions will not be immune from the soon-to-be-expanded onerous CFPB-driven consumer regulatory compliance and enforcement burden. The CFPB has the power to oversee consumer products like mortgages, credit cards, deposit-taking and many other activities typically associated with credit unions. This includes broad authority to prohibit "unfair, deceptive or abusive" acts and practices as defined by those in power at the CFPB.
I am gravely concerned that as CFPB leader Warren will use the position to promote her opinionated anti-business interpretation of what constitutes a level playing field. I fear that her disruptive social justice agenda will endanger safety and soundness, and will reduce the availability of credit - especially for those who need it the most. To visualize the potential negative impact on credit unions and other providers, consider what might happen if the Center for Responsible Lending, the National Consumer Law Center, the Consumer Federation of America, and similar groups were given the authority to determine what financial products could be offered and under which terms and conditions. These advocates of central planning purport to know what's best for every consumer - and through the CFPB they intend to seize every credit union's freedom and the freedom of our consumer members to make their own financial decisions.
Even if Warren does not eventually get designated as official CFPB director and face Senate confirmation, in her advisor role she will be instrumental in staffing the bureau with left-leaning consumer activists, establishing an interventionist mission, and publicly vilifying credit unions and other financial services providers that do not toe the CFPB line. My mother taught me to give people the benefit of the doubt, and I should probably apply that to the Warren appointment. But the alarm bells are loud and persistent - and nearly impossible to ignore.
Charles Bruen is president/CEO of First Entertainment Credit Union in California.