Consumer agency chief plans to think 'expansively'

Elizabeth Warren says that a new consumer protection agency must go big or go home. The Harvard professor, who was appointed in September as a White House aide to oversee the development of the Consumer Financial Protection Bureau, said that the department must move beyond regulations that address specific problems with mortgages, car loans, credit cards and other products. As an example, she pointed to credit card reform legislation that was designed to crack down on industry practices that would surreptitiously raise rates. Lawyers soon figured out ways to skirt the law, she said. “We need to think more expansively about credit regulation and credit markets,” Ms. Warren said today at a meeting in Washington sponsored by the Consumer Federation of America. “We limit what we can achieve if we narrow our focus to targeted rules. The consumer credit market is broken, and we need to repair that market.” She is guiding the creation of the agency, which was mandated by the Dodd-Frank financial reform law. It will take over the consumer protection work now being done by seven different federal agencies under 19 laws. President Barack Obama did not appoint Ms. Warren as director of the bureau because of fears that she would not be confirmed by the Senate. Plans for the agency became a lightning rod for Republicans during congressional debate over Dodd-Frank. Rep. Randy Neugebauer, R-Texas, a member of the House Financial Services Committee, said that the GOP majority that will take over the House in January has the agency in its sights. Speaking just before Ms. Warren took the stage at the CFA conference, Mr. Neugebauer said that he would like to modify Dodd-Frank to give Congress more oversight of the agency. “It has a very broad rulemaking authority over an entire industry with really not a lot of accountability,” he said. “Congress does not have the ability to shape some of that policy.” The goal of the agency should be to ensure that loan costs and risks are transparent, and that people have enough information easily to compare one product to another, Ms. Warren said. She wants the bureau to restore balance in contract law so that consumers aren’t caught by surprise by changing terms. “The customer is bound but the lender can cross its fingers behind its back,” she said. Combating “legalese” in the explanation of rules surrounding loans is one of Ms. Warren’s priorities. “Over time, disclosure has become a code word for obfuscation,” she said. In order for the bureau to win public support and withstand political attacks, it will have to pursue an agenda that has clearly delineated goals and principles, Ms. Warren said. It should have a brand as well-known as the Food and Drug Administration and the Federal Aviation Administration. “American families have the agency they need, but they may have to fight for its survival,” Ms. Warren said.