The Need for the Consumer Financial Protection Bureau

Elizabeth Warren wrote an op-ed for the Miami Herald before the holidays about how the new Consumer Financial Protection Bureau could have prevented all the fraud and abuse in the mortgage lending industry had it been around a few years ago.

The practices now under investigation took root and grew because there was no single federal regulator with both the responsibility and the tools to look out for consumers.

Had it existed, the new consumer agency could have stopped these problems before they multiplied. Many of the failures already admitted were not sophisticated scams that had been carefully concealed. By enforcing existing laws and involving state authorities early on, the agency could have made sure that the law was respected. No one would need to wonder whether the world of borrowing and lending works only one way: Families have to follow the legal rules, but the rules are optional for big banks.

Once it is fully operational, the new consumer agency will have supervisory authority over all large mortgage servicers. It will be able to examine them on a regular basis to make sure they follow the rules. If those servicers decide it is cheaper or faster to circumvent federal law, the consumer agency will have the tools to hold them accountable.

No one will be allowed to break the rules without triggering a strong and prompt federal response.

Check out testimony of The Leadership Conference on Civil Rights’ Nancy Zirkin calling for independent financial regulatory agency from July 2009.