Consumer bureau has done good things in first year

With the Consumer Financial Protection Bureau approaching its one-year anniversary on July 21, I looked back at the agency’s rookie year.

Overall, I would say the consumer watchdog gets a “meets expectations” in its evaluation for accomplishing its primary goal of becoming an unapologetic protector of consumers.

The bureau was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the most sweeping overhaul of financial regulations in decades. It was charged with promoting financial education and enforcing federal consumer financial-protection laws. It was given rulemaking powers so that it could head off unfair, deceptive and abusive financial practices and products.

This first year, the agency has done a lot of fact-finding. The agency has asked the public — consumers, the financial services industry and consumer advocates — to weigh in on a number of issues from credit cards to credit reporting agencies to student loans to mortgages.

Perhaps the agency has become best known for its “Know Before You Owe” initiative, a project that aims to help people understand the consequences of the debt they take on. It’s a campaign that could have the biggest impact long term.

Had more people understood the consequences of their borrowing and recognized and avoided the predatory practices used to get them to dig a debt hole they couldn’t get out from under, we wouldn’t have had the housing meltdown. The Know Before You Owe initiative isn’t just about blaming the financial industry or even shifting all the responsibility onto the companies. It’s about making sure people have all the information they need to make better financial decisions.

As part of the initiative, the agency has just proposed a redesign of federal mortgage forms to highlight interest rates, monthly payments, the loan amount and closing costs. The forms would warn consumers about certain loan features such as prepayment penalties.

Additionally, the consumer bureau is proposing rules specifically for so-called “high-cost” mortgages, defined as first mortgages that carry an interest rate that is 6.5 percentage points above the average prime rate.

The protections for consumers with such mortgages would largely ban balloon payments, cap late fees and prohibit lenders from charging prepayment penalties and financing points and fees. I particularly favor the requirement that would require consumers to receive housing counseling before taking out one of these mortgages.

The agency opened a consumer complaint line. People get a tracking number, which allows the agency to update folks on the status of their complaints. In the last 11 months, the agency received more than 45,000 complaints, many about credit cards and mortgages. More than 37,000 complaints have been sent to companies for review and response. The rest were referred to other regulatory agencies, were incomplete or are pending.

The agency said it prioritizes and investigates complaints in which the consumer disputes a firm’s response or where companies fail to provide a timely response. If you have a complaint about credit cards, mortgages, private student loans, bank accounts and other consumer loans, you can go to www.consumerfinance.gov/complaint.

Even if complaints aren’t resolved to the satisfaction of a consumer, at the very least the bureau gets an-close look at the financial issues people are facing.

There’s a whistleblower hotline where employees, contractors, vendors and competing companies can confidentially report suspected violations of federal consumer financial laws. The toll-free number is 855-695-7974. You can also send information to whistleblower@cfpb.gov.

I wish more people who believed their companies were pushing bad mortgages had had the courage to blow the whistle. A poll last year by the law firm Labaton Sucharow found that 34 percent of employees had knowledge of possible workplace wrongdoing.

So far, the agency hasn’t caused havoc to our economy despite warnings from Republican lawmakers who tried to block the appointment of a director, absurdly arguing that the consumer bureau was too powerful. In a letter to President Obama last year, Republicans said the agency would negatively affect every American household “by limiting their choices when purchasing financial products, restricting the availability of credit to consumers, and increasing the cost of goods or services purchased using credit.”

Duh. The point of the agency is to help people see their financial limits, and that might mean it will restrict the credit available to them. It should. If the agency imposes regulation that curbs abusive and deceptive practices, we all are better off, including the companies that do the right thing.

We needed a pit bull-type agency to protect consumers. In its inaugural year, the Consumer Financial Protection Bureau is doing a pretty good job of doing just that.

Michelle Singletary: singletarym@washpost.com.

Washington Post Writers Group