Consumer Financial Protection Bureau - Yet Another Federal Bureaucracy


Consequences and solutions
CFPB will have the power to impose

The Dodd-Frank Wall Street Reform and Consumer Protection Act contains numerous components while one of the larger ones is getting ready to make it's first appearance. The Consumer Financial Protection Bureau (CFPB) is projected to begin operation on July 22, 2011.

In reality work has already started behind the scenes which has been going on for several months. This new bureaucracy has been creating staff and getting their systems up to speed and projected be ready to open their doors by the July 22 date. Also they have been performing some initial Dodd-Frank tasks like combining the TILA Truth in Lending (TIL) statement and the RESPA Good Faith Estimate (GFE) into a single disclosure. This development, has been somewhat of a new surprise and appears as a promise as to how CFPB will deal with its many future regulatory undertakings.

In place of the typical Washington regulatory waltz of springing a regulation on the public and the industry and allowing 30 to 60 days for comments and then giving the public all the reasons they are mistaken and why the bureaucracy is correct, CFPB is involving the financial industry and the general public prior to creating a rule. As someone close to regulatory situations on a regular basis, I found myself asking, "where's the gimmick?" After hearing there appears to be no gimmick, I began feeling somewhat more relieved.

CFPB is fundamentally open to rolling remarks or "pre-remarks" on basically a preliminary proposition to blend both forms and the related regulatory requirements. The procedure and the links for commenting is available at http://www.consumerfinance.gov/knowbeforeyouowe/. A number hearings out in the field have been planned along with other tests, plus many fine tweakings of their suggested new forms and other concern associated with the merging of these rules and this process will continue on into this fall.

It looks as if CFPB is off to a good beginning, although it is imperative to understand that the agency has an immense amount of critical functions and added powers that previous agencies did not. CFPB will be assuming responsibilities for a dozen or more laws which have an affect on home buyers, sellers and the housing industry including RESPA, SAFE. TILA, HMDA, HOEPA, and FCRA. The bureaucracy will also have momentous resources available for enforcement of these laws as they will be withdrawing Federal Reserve revenues to support their budget, not appropriations from Congress. CFPB will also assume the rule-creating for the Qualified Mortgage (QM) later on in July. The QM is a mortgage type that is not considered predatory and is, consequently, most likely to become the mortgage standard of the future.

Possibly most noteworthy are the consequences and solutions CFPB will have the power to impose. CFPB will be able to force rescissions, demand restitution, prohibit or limit arbitration in certain situations, enforce damages, request injunctive relief, and enforce fines that can become as high as $5,000 per day for negligent violations and as much as $1 million per day for flagrant offenses.

Real estate brokers and agents have a partial exemption from new rules not created under existing laws like RESPA. Although, they will still have to abide by to all the rules inherited by the CFPB and all rules created under those existing laws including RESPA. Having new penalties, plus a greater amount of resources for enforcement, it's pretty easy to envision a great deal more enforcement activity down the road and in fact, you should anticipate and prepare for it.

So while the CFPB has has a refreshing new approach to rule-creation, it is, at the center, a consumer protection operation and will take its job serious. The employees who work there envision themselves as being the new "sheriff in town" plus they pack the weapons and the a

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