Elizabeth Warren, the special adviser to the Treasury Department
, told an audience of community bankers Tuesday that the Consumer Financial Protection Bureau
she is working to construct will look to cut regulatory costs for smaller financial institutions.
Created under the Dodd-Frank Act, the CFPB will become the primary regulator for the entire mortgage industry when it opens July 21. Warren is currently in charge of building the agency and is likely to be nominated as its director.
But community bankers are troubled by the arrival of yet another regulator. Conforming to new transparency and reporting requirements would put smaller banks at a competitive disadvantage with those companies that can afford the compliance costs.
But Warren, speaking before the Independent Community Bankers Association
in San Diego, addressed this concern and promised the agency would keep those costs to a minimum.
"I appreciate the widespread anxiety and frustration over the future of community banks and other small financial institutions," Warren said. "I know that you want a regulatory structure that doesn’t require an army of lawyers. Big banks may be able to afford to hire all those lawyers, but you cannot."
The CFPB's first order of business is to combine the Trust in Lending and Fairness Act disclosure document with the one required under the Real Estate Settlement and Procedures Act.
"One of the amazing things about this new consumer agency is that it has the opportunity to cut back on regulatory costs. With your help, we have set our first initiative squarely in mortgage documentation," Warren said. "When it comes to piles of paperwork, less is better for you and your customers."
Warren said community banks did not cause the financial crisis, and she vowed to work with these businesses to promote clearer products in the future.
"Some of the complicated papers that consumers receive – at a real estate closing, for example – are required by government regulations," Warren said. "This complicated, duplicative paperwork forces small financial institutions to reallocate precious resources away from serving customers and toward filling out more forms."
But Republicans on the House Financial Services Committee recently challenged not only her credibility but the scope of her authority. Committee Chairman Rep. Spencer Bachus (R-Ala.) introduced a bill
that would establish a commission, not a director to head up the CFPB in an attempt to quell the agency's new powers. Committee members even questioned the agency's involvement with the current foreclosure investigation from the 50 state attorneys general.
On CNBC's "The Call" Tuesday morning, Warren addressed the concerns, echoing the same points
she made before the committee.
The agency will, according to Dodd-Frank, be the most scrutinized in government because it relies on Congress for budget considerations and that a separate council of federal regulators can overrule the CFPB with a vote. As for the investigation, Warren said her involvement is not out of the ordinary.
"They asked for our assistance, and we told them what we thought," Warren said in the CNBC interview. "When asked by someone else in government to help in a law enforcement matter, I'm proud to assist with that."
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