The Consumer Financial Protection Bureau turned five on Thursday, but the jury is out on just how effective the agency is in stopping the next financial crisis, according to one expert. ‘It’s way too early to determine in the first five years whether or not it has acted sufficiently to prevent the next crisis,’ said Jennifer Lee, a partner with law firm Dorsey & Whitney and a former CFPB enforcement lawyer. ‘But certainly that’s the intended design.’ Lee pointed to a host of complex and multifaceted factors that lead to the 2008 financial crisis, including the securitization of subprime mortgages, making it tougher for the organization to prevent the next financial crisis, given its narrow focus on the consumer. That said, consumer are more cognizant of financial red flags and scams, in Lee’s view, than they were prior to the creation of the CFPB. ‘Consumers are more well aware of the nuances and regulatory systems and structures that are in place to enforce their rights,’ she said, adding that the CFPB has worked to ensure more transparent disclosures when it comes to the process of applying for credit cards and mortgages, but it’s ultimately up to the consumer to read the fine print and take advantage of the CFPB’s work. ‘An open question remains whether or not the effects of the bureau of really trickling down to tangible benefits to consumers, but certainly there is a philosophical benefit in a sense that now there is a Federal watchdog that’s overseeing consumer protection,’ she said. The CFPB regulates the consumer financial markets, including retail banking, financial services and ‘any product or service that touches an individual consumer,’ she said, adding that the agency has slapped various financial institutions and players with over $11 billion worth of fines, according to Lee. ‘The authority that the CFPB has is incredibly broad,’ she said, adding that the bureau was created out of the comprehensive Dodd-Frank financial reform bill, passed in 2010, in response to the 2008 financial crisis. TheStreet’s Scott Gamm reports from Wall Street.
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