In First Public Speech, Consumer Watchdog Lays Out His Plans

The new interim director of the nation’s first consumer protection agency for financial products gave his first public speech on Thursday, laying out far-reaching plans to regulate an array of credit services. Speaking in Philadelphia, Raj Date announced the bureau’s top priorities, including everything from mortgages to credit cards and checking accounts.

And he did what he could to soothe concerns among Republicans and Wall Street leaders that the new Consumer Financial Protection Bureau will become overzealous in regulating financial companies.

“We won’t shoot from the hip. We won’t reason from ideology. We won’t press a political agenda,” Date said. “Instead, we’re going to be fact-based, pragmatic, and deliberative.”

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Date also laid out his top priorities for the coming months. The top focus will be mortgages. Why? “First, the mortgage market is enormous,” Date said. “At some $10.4 trillion, it’s more than ten times the size of the next biggest consumer lending market.”

And if you’ve ever tried to read a mortgage agreement, you know: It’s impossible. The contracts are so long and so burdened with legalese that even real estate lawyers can’t make quick sense of them.

So the bureau will come out with a proposed rule in the next few months that Date says will force lenders to simplify the paperwork. After that, expect the bureau to publish some proposed rules concerning the mortgage servicing industry, which has been criticized recently for attempting to paper over the problem of missing mortgage documents by employing robo-signers to create forged court documents.

“It is simply not acceptable to cut corners. The law still applies,” Date said.

Next on the list are student loans. Here the bureau plans to take more of a back seat, Date said, checking to see whether rules implemented by the Federal Reserve in 2009 have actually been effective, and working with the education department to study the entire student loan market.

They’ll especially be on the lookout for loans that lenders know students will never be able to repay, and alleged recruiting abuses by for-profit schools to increase the amount of money they make from federal grants and loans.

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The bureau also plans to check out what’s happening with checking accounts. Such accounts cost banks money, but many institutions advertise “free checking” to lure new customers. In fact, Date says, the costs for those accounts are often covered by overdraft and other fees that fall disproportionately on people least able to pay.

Finally, Date wants to do something about all the non-bank companies offering short-term cash, including industries like payday loans that are often accused of abusing consumers.

That’s a lot of work for one new agency, especially one without a permanent director. President Obama nominated Richard Cordray, formerly Ohio’s attorney general and now chief of the bureau’s enforcement division, to become the agency’s first director, but Senate Republicans have vowed to block any nominee until they win some restrictions on the bureau’s power.

If a full-time director is ever confirmed, the bureau immediately will get the power to write its own rules. (All the powers it has now already existed, but they were enforced by different agencies.) In the meantime, Date agreed, the bureau’s plate is more than full.

“Consumer protection in financial services is a hard job,” he said. “And Congress recognized that if you don’t make someone singularly accountable for doing a hard job, you shouldn’t expect it to get done well.”

Image: Cambridge Winter Center for Financial Institutions Policy