New CFPB Leader Pledges 'Tough' Enforcement Regime

PHILADELPHIA — In his first speech since taking over for Elizabeth Warren as the public face of the Consumer Financial Protection Bureau, Raj Date warned that the agency will take a firm stance when it identifies practices that are harmful for consumers.

"Banks and other firms will find that we are fair-minded. But we're tough-minded, too," Date told a group of bankers and consumer advocates in Philadelphia on Thursday. "Make no mistake: When we find unjustified practices that cause substantial consumer harm, we will take the necessary action to put an end to them."

He emphasized, however, that enforcement is only one tool the bureau will use, along with supervision, rulemaking and research.

"In some ways our approach to enforcement is going to be better informed, I would argue more sensible and more highly effective, precisely because we have other tools at our disposal," said Date, the special adviser to the Treasury secretary who is running the bureau until a permanent director is installed. "And that way we're going to be able to make sure that when enforcement is the right tool to use, I assure you we will not hesitate to use it."

The CFPB organized the event at the National Constitution Center in Philadelphia to observe the three-year anniversary of the collapse of Lehman Brothers and the start of the financial crisis.

During the speech, Date focused on the agency's overall goals, but hinted it would be taking a closer look at specific products such as overdraft programs. He cited a Federal Deposit Insurance Corp. study that found that 84% of overdraft fees were paid by 9% of checking account customers and noted that the Federal Reserve Board and other agencies have taken action to make such fees more transparent.

Still, he said there "is understandable concern about the inconsistency that may result from separate supervision regimes."

"We also recognize that there are a variety of products which are targeted at consumers who have a short-term need for cash - including products offered outside of the traditional banking sector," Date said. "The consumer agency has the capacity to address this range of products in an even-handed way. "

Date said that the agency plans to examine the issue to ensure the market for short-term credit is "fair, transparent and competitive."

"We will be monitoring the impact of the recent regulatory and supervisory interventions," he said. "If we find that these interventions are not working as intended, we will adjust. And if we find that additional action is needed, we will act."

Speaking more broadly, Date said the work of the CFPB will not only enhance financial markets, but will help jumpstart the entire economy by giving consumers the confidence to borrow for a home or a child's education, and giving banks the confidence they need to innovate and compete.

"If we get this right, the bureau will support the work of rebuilding our economy and it will promote a better financial future for every single one of us," Date said.

He touted the agency's early work to tackle problems in the mortgage market, including efforts to streamline mortgage disclosure forms. He said the CFPB has also been working with other federal agencies to develop basic standards for mortgage servicing.

"We want to establish some common-sense safeguards to prevent bad practices from harming consumers," Date said. "That's why we're developing new rules to help borrowers get loans that make sense for them - loans that they can reasonably expect to repay."

He said the agency's work will be targeted toward product transparency, common-sense rules, consistent oversight and smart enforcement.

Although he emphasized that the rules should, and will, apply to all players in the mortgage market, he left out the fact that the bureau can't exercise that authority until a permanent director is in place.

"Without a level playing field, even honest businesses can feel pressured to lower their standards, to avoid losing market share or losing money," he said.

Date said the lessons learned from the financial crisis will help inform the bureau's work in three other key markets: credit cards, student lending and checking accounts.

The CFPB is widely expected to issue more rules on credit cards, which was a key area of focus for Warren.

Date acknowledged that the CARD Act addressed a number of longstanding concerns about transparency and fairness, but he said that alone isn't enough. One of the agency's most important jobs will be creating an effective and credible supervision program, he added.

Date said the bureau will also be monitoring new disclosure requirements for private student lenders, and will begin collaborating this fall with the Department of Education on a comprehensive study of the private student loan market.

He said the agency will also be looking for problems in the student loan market, including lenders offering loans that they know students won't realistically ever be able to repay, or for-profit institutions pushing their own high-cost private loans and using questionable tactics to recruit veterans so they can collect more federal dollars.

Philadelphia Mayor Michael Nutter, who introduced Date, praised the CFPB's early work, and said the agency "will go down as one of the greatest examples of government having a very positive impact on regular, everyday people."

He also said Date, a former banker who worked for Capital One and Deutsche Bank, is uniquely equipped to lead the bureau.

"He knows Wall Street and he knows Washington; he knows Main Street as well," Nutter said. "So he is perfectly placed to provide that analysis that all of those worlds really need as they intersect with each other in what really drives the American economy."