By Christine Dugas, USA TODAY
Elizabeth Warren, special adviser to the president, is trying to help shake things up as she puts together the nation's first federal consumer protection agency.
The new Consumer Financial Protection Bureau (CFPB) will not officially start until July 21. And its final shape is uncertain as Warren faces many challenges and a host of criticism.
But the Harvard University bankruptcy professor, who first proposed the idea of a consumer financial regulator in 2007, isn't daunted by the task and says she is off to a good start as she scrambles to hire staffers, initiate policies and meet with consumer advocates, bankers and many others.
PROTECT YOURSELF: How to be your own consumer protection agency
KNOW YOUR RIGHTS: Consumer protection laws
"This new agency did not come into being because special interests demanded it or lobbyists spent hundreds of millions of dollars to make it happen," Warren said in an interview. "But ordinary Americans pushed hard for this agency. They said loud and clear that they wanted an agency in Washington to level the playing field with big banks."
Warren has long been a voice for the consumer. But she had little power when, as a professor, she opposed what she saw as costly bank fees and predatory lending in testimony before Congress and her writings on the subjects. She now spends her time and energy starting an agency that she says has been born of optimism.
That doesn't mean it will not face obstacles. "We're all going to have to take a deep breath and cross our fingers that it can get off to a really strong start," says Ruth Susswein, deputy director of national priorities at Consumer Action, an advocacy group.
In July, more than a year after the Obama administration proposed comprehensive financial reform, Congress passed the Dodd-Frank financial reform bill. The sweeping legislation created the CFPB to combat consumer abuses in the marketplace.
House Republicans, who will share power when the new Congress convenes in 2011, have not been fans of the new legalization and the bureau it created. Critics have said that the bill would crimp the economy by imposing credit-killing restrictions on banks and other financial institutions.
House GOP lawmakers already have called on the Treasury Department and Federal Reserve to closely monitor the steps being taken to establish the bureau. They also claim that Warren lacks the experience necessary for the job and that the agency lacks accountability.
Consumer groups are strong supporters of the agency. But even her backers have opinions about what the agency's first priorities should be. They want the new bureau to:
•Be a watchdog for credit cards. "Before the ink was dry on the credit card bill, credit card companies were coming up with fine-print tricks to catch people," says Mike Calhoun, president of the Center for Responsible Lending. "American families want someone watching over them and protecting their interests and consumer financial transactions," he says. "You can be diligent and still be clobbered by financial traps."
•Put the same standard on prepaid cards and debit cards that are on credit cards. That's important because prepaid cards are growing fast with little regulation, says Travis Plunkett, legislative director of the Consumer Federation of America.
•Keep money in a consumer's pocket. "That is the first general thing that I would add to the list," says Pamela Banks, senior policy counsel for Consumers Union. That includes a host of issues, such as considering additional reforms for overdraft protection. "If a consumer opts for overdraft protection, the fees are still very expensive, and it can add up," she says.
•Create an effective, responsive consumer complaint system. "That is at the top of our wish list," Susswein says. She says it will help people resolve their complaints, help guide rulemaking and could alert authorities to new types of problems that need addressing.
•Help ensure that all homeowners are considered for foreclosure prevention, provide oversight for the new federal program for bridge loans for unemployed homeowners and establish a process that allows consumers to more easily correct credit report errors.
More eyes and ears
The new agency aims to use high-tech tools and the Internet to help it tackle problems more quickly.
For example, Warren is encouraging consumers to use their digital cameras and phones to scan dubious or suspect financial offerings or products, and e-mail them to the CFPB. That would allow the agency to more quickly respond, keep track of similar problems and see if certain groups of people are being targeted, she says.
The agency will have many more eyes and ears in the wired world, Warren says, and will keep consumers informed. She has already used the White House blog to tell Americans, "If we set it up right from the beginning, the agency can collect and analyze data faster and get on top of problems as they occur, not years later."
The bureau has overwhelming responsibilities, Calhoun says. It is starting from scratch, and it won't be able to do everything at once. And with theRepublican control of the House, the fear is that too much time will be spent interrogating the consumer bureau, instead of letting it do its work, he says.
One clear message to banks and credit card issuers is that consumers now will have a powerful advocate, says Warren: "The very existence of the agency has sent a strong signal to the credit industry that Americans want a change. And they want someone on their side."