Even if Senate Democrats are able to get enough support from the other side of the aisle to pass Wall Street reform next week, creating the consumer protection agency will be no easy task.
The regulatory reform bill lays out an ambitious agenda for the Consumer Financial Protection Bureau, including quickly detailing the scope of its powers and harmonizing regulations that implement two of the most complex lending laws on the books says American Banker.
But the legislation largely leaves the new regulator on its own for how to accomplish those goals in addition to hiring needed personnel and getting itself up and running.
“While Congress has laid out the structure, it’s going to take a long time and be very complicated to translate the concept into something that works,” said Andrew Sandler, a partner at Buckley Sandler LLP.
Under the final bill, which was approved by the House but must still be passed by the Senate, the Treasury secretary must transfer consumer protection powers to the bureau between six months to a year after enactment of the legislation, with the option to extend it to 18 months if necessary.
The bill directs the president to nominate a director, who must be confirmed by the Senate, and a deputy director. Until he or she is in place, the Treasury secretary would serve as interim director.
According to the Wall Street Journal, the director will add thousands of employees from existing agencies like the Federal Reserve’s consumer-affairs division, Federal Trade Commission, Comptroller of the Currency and Federal Deposit Insurance Corp—much as the larger Department of Homeland Security was created by melding dozens of existing agencies.
During a transition of up to 18 months, some employees will continue to work for their existing bosses to write and enforce consumer regulations. “The transition is going to be awkward,” said Cornelius Hurley, a former Fed lawyer who directs Boston University’s Morin Center for Banking and Financial Law. “The music doesn’t stop just because they pass the law,” he said.
The reverse mortgage industry will be paying close attention to how the agency is formed and operates since the bureau is required to conduct a reverse mortgage study to determine any deceptive or abusive practices within one year. Additionally it’s being asked to determine whether suitability standards are necessary, as well as safeguards to protect consumers from being sold reverse mortgages to fund inappropriate annuities, investments, and other financial products.