Three years after the Lehman Brothers bankruptcy filing wrought havoc on the nation’s financial system, the Consumer Financial Protection Bureau is taking a tough stance, promising that its oversight and the lessons that can be learned from the financial crisis will benefit the entire economy.
Mortgages comprise more than half of the $20 trillion consumer finance business with credit cards, student lending, and checking accounts being the other major components, Raj Date, special advisor to the Secretary of the Treasury for the CFPB, noted in a recent speech.
And, Date said, almost everyone agrees that “the mortgage market—while not the only problem—was at the epicenter of the global financial crisis,” adding that the U.S. “got into this mess one lousy mortgage at a time.”
The CFPB has hit the ground running in its attempts to fix the big problem of the broken mortgage markets, said Date, detailing the Bureau’s activity since it opened for business on July 21, including its Know Before You Owe project to streamline mortgage documents.
Rules are important in creating a level playing field for all businesses and protecting consumers from predatory measures, he said, but those rules need to be enforced, and that’s exactly what the CFPB intends to do.
“Rules only work if everyone follows them—and that requires consistent supervision and smart enforcement,” he said.
Although he acknowledged that the task of “fixing” the mortgage market won’t be easy, Date said the lessons that can be learned are fairly simple: People should be able to know before they owe; common-sense rules can prevent bad practices from harming consumers; and the rules of the road should apply to everyone—and they should be consistently monitored and enforced.
The CFPB promised to base its judgments on data research and analysis, rather than ideology or pushing a political agenda, and said it will be careful to use the right policy levers to address problems and their causes.
“We will tackle our mission knowing that we are singularly accountable for it… You can count on us to make sure consumer finance markets actually work – for families, for the honest firms that serve them, and for the economy as a whole. Because some mistakes we can’t afford to make again,” Date said.
Read the speech, Lessons Learned from the Financial Crisis: The Need for the CFPB, here.
Written by Alyssa Gerace