New Light for Consumer Financial Protection Bureau

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cfpb logoThe central mission of the Consumer Financial Protection Bureau (CFPB) is to make markets for consumer financial products and services work for Americans. One of the key elements of the U.S. Securities and Exchange Commission’s (SEC) mission is to protect investors. Now, the SEC has a new chief, and her background and track record could lead to a clash between the missions of these two “protective” agencies.

Goal #1 of the CFPB is to “Prevent Financial Harm to Consumers While Promoting Good Practices That Benefit Them.” Yet the SEC has a track record of allowing companies to settle claims of wrongdoing without admitting they did anything illegal or unethical. Mary Jo White, the proposed head of the SEC, has stated in the past she is not a fan of pursuing alleged corporate wrongdoings through the courts since this can be a lengthy, expensive process.

Without a public airing of the extent of alleged wrongdoings, due process through the legal system, and ultimate vindication or conviction of the impacted corporation(s), how is the public to know what a corporation’s practices are? Even the CFPB is unlikely to have access to the details of settlements that don’t involve the courts and the rest of the legal system, so how can they “prevent financial harm”?

SEC settlements have the potential to defeat some of the purpose of the CFPB. Settlements would conceal from the public the very wrongdoings the CFPB is supposed to educate them to avoid.

There is always the possibility that Ms. White will employ the SEC’s ability to impose structural changes on organizations to reduce their capability to violate securities laws, leaving criminal prosecution up to the Justice Department.

In both the short- and long-term it will be very interesting to see how the roles of the SEC, CFPB, and U.S. Justice Department align, and how the American consumer benefits or suffers.

The CFPB is a new and evolving organization, and the steps taken by the SEC to increase enforcement could have significant impacts on how and how well the CFPB can accomplish a major part of its mission. Let’s hope that Ms. White is able to stiffen and increase the enforcement role of the SEC and support the mission of the CFPB.  After all, when good organizations go bad, it is usually the investing public, and the general public, that suffers.

Anna Timone (195 Posts)

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