CFPB – Elizabeth Warren looking for a fundamental Change in Consumer Credit

Elizabeth Warren, the Treasury special adviser in charge of establishing the new Consumer Financial Product Bureau, is looking for a "fundamental change" in the way consumer credit products are designed and sold. If Ms. Warren is successful, the Consumer Financial Protection Bureau will certainly introduce a number of new credit product disclosure rules and regulations.

At a recent Consumer Federation of America conference , Elizabeth Warren noted, however, that there are limits to what can be achieved if the focus is only on rule-making. "This agency can issue thou-shalt-not rules--and some companies can try to work around them, and the agency can issue more and more rules. That approach will eliminate some of the worst practices. But the market still will not work as it should. I'm here to argue that we need fundamental change, not just narrow rules that ban the latest abuses. We need tough, no-nonsense changes that will last and that will address the real, underlying issues."

The CFPB will make credit card and mortgage disclosures a priority according to Warren. Ms. Warren said, "It is this simple: No customer should be asked to take out a loan without knowing the costs or the risks of the deal. And every customer should be able to compare different financial products straight up."

In the speech, Warren used the credit card regulation that recently went into effect as an example of rules meant to protect consumers that didn't work as well as hoped. In the case of credit card companies, many financial firms immediately acted to circumvent the new laws. As Warren pointed out in her speech, this is how the game is played - regulators create new rules and financial firms find clever ways to avoid them. Warren seeks to end that game.

Warren has said she believes that the mortgage meltdown could have been avoided if mortgages were clearer and shorter. "The crisis of 2008 was a preventable disaster," she said. Warren argues that regulators should write rules ensuring that customers have the information they need to make decisions that are right for them.