Credit union trade groups are cautiously optimistic while Republicans are downright frustrated with the early moves of the new consumer bureau.
The Bureau of Consumer Financial Protection, set to begin operation in July, hasn’t issued any regulations yet, but its officials have already been planning their policies on issues ranging from credit cards to mortgage rules.
CUNA President/CEO Bill Cheney said he has a good working relationship with Elizabeth Warren, who is leading the agency’s setup, and her key staff members. And officials have been solicitous of input, but Cheney said he’s unsure whether the agency is going to keep its pledge not to increase the regulatory costs to credit unions.
"Elizabeth Warren has said ‘if any of our regulations result in a net increase in expenses for credit unions then we will have failed,’ and we wish that were above the door of every regulator, including the NCUA," Cheney said.
"When she spoke at GAC, she spoke of there being a partnership between credit unions and the agency and that was nice to hear. Other regulators, like the NCUA, don’t see the relationship in the same way."
NAFCU Vice President and General Counsel Carrie Hunt said the bureau has been receptive and said it appreciates the work of credit unions and other small institutions. However, "we need to see how it plays out, and see what the substance of their policies looks like."
The bureau, an independent agency housed inside the Federal Reserve, was established as part of the financial overhaul bill passed by Congress last year. It will be hiring new employees and employees from existing agencies that will be transferred. The NCUA is scheduled to send one employee to the bureau.
The bureau’s first big initiative has been consolidating the mortgage disclosure forms required under the Truth in Lending Act and the Real Estate Settlement Procedures Act.
General mortgage information would be on the first page and more specific details about the mortgage costs would appear on the second, according to prototypes of forms.
The first page has information on the loan amount, taxes, down payments and tools to compare the loan to others. The second page contains a detailed loan estimate with an estimate of what the consumer would pay at closing.
The bureau has set up two sample forms, which contain the same information but have different layouts. It will test with lenders, brokers and consumers in six cities before coming up with a final form that it plans to send out for comment in July 2012.
In addition to the bureau, many individual regulators have divisions that deal with consumer issues. The NCUA started its Office of Consumer Protection last year, and it is still ramping up its operations. The agency’s budget sets aside funds for 37 full-time equivalent employees and the office now has 25.
And while the bureau's charm offensive has smoothed things over with some trade groups, Warren has had far less success with congressional Republicans. They opposed the agency from the start and have been critical of almost everything the agency has done during its setup.
The tensions came to a head at a May 24 hearing at which House Republicans accused Warren of lying about how much of a role she was playing in negotiations with mortgage servicers. They said Warren is trying to establish an agency with unprecedented powers.
"I have been told that if you say anything in Washington often enough, it is eventually treated as fact–regardless of whether it is true or false. While making baseless claims might be shrewd tactics for those who want to undermine the bureau’s work, they are flatly wrong," she told the House Subcommittee on Oversight.
On May 13, the House Financial Services Committee passed, along party lines, three bills changing the bureau’s structure. The measures would have the bureau run by a five-member board rather than a director; allow the bureau’s decisions to be overturned by a majority vote of the Financial Stability Oversight Council rather than two thirds; and delay the startup of the bureau until a director is in place.
Even if the full House passes those bills, the Democratic-controlled Senate isn’t likely to pass them. However, Senate Republicans have said they would oppose anyone who President Obama nominates to run the bureau unless those changes are approved. The rules of the Senate require 60 votes for almost every issue, and it is not possible to get 60 votes without some Republicans.
If Obama nominates Warren there would likely be a partisan fight over her confirmation. That’s one reason some Democrats have approached Warren and asked her to consider running for the Democratic nomination for the Senate in Massachusetts.