Some may wonder how a watchdog with no head can do much watching, but that’s the current state of affairs as the new Consumer Financial Protection Bureau, one of the administrations key financial reform programs coming out of the 2008 financial crisis, officially opens for business on July 21.

Created as part of the package of reforms known as the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, the new CFPB is tasked with being a kind of consumer protection agency specifically for customers of financial institutions.

It has been given broad powers to require banks and other financial institutions under its purview (those with more than $10 billion in assets) to clearly explain to customers the costs and risks of financial investments, loans and mortgages, to prevent frauds and deceptive practices, and to make sure government rules and regulations governing financial services stay up to date.

The financial services industry has lobbied hard to weaken the powers of the agency, and Republicans in Congress, claiming that more regulation of financial services is not needed, have so far succeeded in preventing the woman who came up with the idea for the agency in the first place, Harvard Law Professor Elizabeth Warren -- the White House’s nominee to head the new bureau -- from being confirmed.

Republicans say they will block any nominee unless the powers of the new CFPB are scaled back.

Although the board is barred from supervising non-financial firms, such as those that provide student, pay-day and mortgage loans, until it has a confirmed director, the board already has plans to dispatch examiners to the more than 100 large banks that collectively control 80% of U.S. banking industry assets. Their marching orders are to root out discriminatory lending practices and to ensure that products and services on offer don’t put consumers at risk.

Warren has been running the new office informally during the set-up phase, and the likelihood is that once Congress goes into recess, the White House will try to name her -- or perhaps someone more acceptable to some Republicans -- in a recess appointment.



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