Your New Financial Watchdog: What It Can Do

Your New Financial Watchdog: What It Can Do

by Ashley Lownsdale

Monday, July 18, 2011

At E Bank Harmony

Consumers get a major advocate on July 21, 2011, when a new federal agency officially opens for business as a watchdog over the myriad financial products on the market.

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The Consumer Financial Protection Bureau (CFPB) will have broad powers to police how banks, credit unions, debt collectors, payday lenders and other financial services companies conduct business with their customers. If products or services are unfair or deceptive, consumers will have a single place to turn for help -- rather than as many as seven different regulators.

But it is very much a work in progress. At its launch Thursday, the bureau will be leaderless, though President Obama is set to nominate its first director, Richard Cordray, the former attorney general of Ohio. Cordray will have to be approved by the Senate to take office.

A long list of issues await him, or whoever eventually heads the agency. Here is an alphabetical list of payment industry services and practices that the new consumer watchdog is scheduled to have jurisdiction over and what it may do about them.

Credit Cards

Issue: The most sweeping credit card reforms in history were included in the Credit CARD Act of 2009. Among other things, the law limits fees and when interest can be hiked and how credit cards are marketed to minors and young adults. It also requires issuers to give cardholders advance warning of significant changes to their account terms. However, consumer groups complain that new credit card services and products not specifically banned by the law are cropping up and raising concerns about fairness and deception. Credit cards issued to businesses do not enjoy the same protections given to consumer credit cards.

What the bureau may do: The CFPB will have the authority to enforce the CARD Act provisions, supervise large bank issuers of credit cards, monitor industry practices and new products, collect and review consumer complaints about credit card practices, and, if necessary, draft additional regulations.

How to complain: First, call the credit card issuer to point out the problem and ask for a resolution. If that fails, contact the regulator that oversees the credit card issuer. Consumers can contact the CFPB's Consumer Response Center once it becomes operational.

Credit Counseling Agencies

Issue: Both nonprofit and for-profit companies offer services to help consumers who are drowning in debt create family budgets, cut spending on non-essential items and negotiate debt management plans with creditors to pay off their bills. Federal bankruptcy laws require credit counseling before and after filing for bankruptcy. The Credit CARD Act of 2009 requires credit card issuers to provide toll-free numbers to credit counseling agencies on monthly billing statements.

What the bureau may do: Credit counseling agencies are nonbank providers of financial services. Once a CFPB director is appointed, the agency will have the authority to regulate all credit counseling services to ensure that they are operating fairly.

How to complain: Contact CFPB's complaint system once it is operational. The Federal Trade Commission takes consumer complaints online and through its toll-free number: (800) FTC-HELP. You can also contact your local or state consumer affairs agency.

Credit Repair Services

Issue: Companies that advertise credit repair services to remove negative information from credit reports are often criticized by consumer groups because no one can legally remove accurate negative information from a credit report. Consumers who sign up for these services may find they've been scammed, although there are legitimate credit repair services.

What the bureau may do: The CFPB can collect and review complaints from consumers who are duped by the largest credit repair companies, and enforce existing federal laws banning unfair and deceptive practices. Once a CFPB director is appointed and rules are established to determine what companies are the "largest participants," the agency can supervise those companies and draft new regulations to prevent fraud.

How to complain: Contact CFPB's complaint system once it is operational. The Federal Trade Commission takes consumer complaints online and through its toll-free number: (800) FTC-HELP. You can also contact your local or state consumer affairs agency.

Debit Cards

Issue: Debit cards are the No. 1 noncash payment method in the United States. These payment cards are linked to checking or savings accounts and allow users to avoid carrying cash and quickly pay for everything from lattes to rental cars. However, there are fewer consumer protections on debit cards than on credit cards, and users have to watch.