On January 10, 2011, the Inspectors General of the Department of the Treasury and Federal Reserve Board wrote to Rep. Spencer Bachus (R-Ala.), Chair of the House Committee on Financial Services, and Rep. Judy Biggert (R-Ill.), Chair of the Subcommittee on Insurance, Housing and Community Opportunity, to respond to their numerous questions about Treasury’s activities to establish the Consumer Financial Protection Bureau.
Highlights of their report include the following:
- Treasury Secretary Timothy F. Geithner informally delegated his interim authority under the Dodd-Frank Wall Street Reform and Consumer Protection Act concerning the Bureau to Professor Elizabeth Warren. Professor Warren stated that, as an Assistant to the President, her role is not limited to “standing up the Bureau” but also involves conversations with the President about unrelated matters.
- The designated transfer date (DTD) under the Dodd-Frank Act is currently set for July 21, 2011. Certain Bureau authority that can be exercised by Secretary Geithner (or his designee, Professor Warren) terminates on the DTD, and other authority terminates when a Bureau Director is appointed by the President and confirmed by the Senate. (Although the report does not directly address whether the President could make a recess appointment of a Director, without Senate confirmation, we note that his authority is not limited merely by the U.S. Constitution—as with other appointments—but also by the Dodd-Frank Act, which expressly speaks in terms of Senate confirmation.)
- Under Section 1066 of the Dodd-Frank Act, after the DTD and before the confirmation of a Director, the Secretary (and his designee) can continue to exercise authorities transferred from other federal agencies, such as the authority to: (1) adopt regulations under the Truth in Lending Act (TILA) and other enumerated federal consumer financial laws; and (2) examine large depository institutions for consumer compliance. However, the Secretary and his designee cannot perform new functions during this period. For example, the report states that the Secretary (and any designee) may not during this period adopt rules prohibiting unfair, deceptive, or abusive acts or practices in connection with consumer financial products and services, or supervise or examine nondepository institutions. The report does not detail the full extent to which the Bureau can exercise its enforcement powers during this period, but, under the report’s logic, it appears that it could not bring an enforcement action based on its authority to prohibit unfair, deceptive, or abusive acts or practices.
- No proposed rules are expected before the DTD, although it is possible notices of anticipated rulemaking will go out. Professor Warren and the Bureau implementation team are in the process of identifying rulemaking priorities for the period after the DTD. The priorities will include consolidating mortgage disclosures required by TILA and the Real Estate Settlement Procedures Act, and simplifying credit card agreements to ensure that cardholders understand fees and finance charges. (As an aside, we do not understand the nature of Professor Warren’s dissatisfaction with the tabular disclosures currently required by the FRB, pursuant to the CARD Act.)
- Information about meetings between Treasury personnel and nongovernmental parties concerning the Bureau and information concerning Professor Warren’s schedule are being made publicly available. Click here to view Treasury’s Financial Stability page. To view Treasury’s Freedom of Information Act page, click here. A Bureau Web site, including a forum for public input, is expected to be launched by the end of January 2011.
To help clients understand and comply with the Dodd-Frank Act, Ballard Spahr has formed the Financial Institutions Reform Task Force, which conducts webinars, issues e-alerts, and provides a wealth of information on the firm Web site regarding the Dodd-Frank Act.
Ballard Spahr’s Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). For more information, please contact group Chair Alan S. Kaplinsky, 215.864.8544 or firstname.lastname@example.org; Vice Chair Jeremy T. Rosenblum, 215.864.8505 or email@example.com; John L. Culhane, Jr., 215.864.8535 or firstname.lastname@example.org; Mercedes K. Tunstall, 202.661.2221 or email@example.com; Barbara S. Mishkin, 215.864.8528 or firstname.lastname@example.org; or Mark J. Furletti, 215.864.8138 or email@example.com.
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