Federal leader tells students what new office means for college money

October 28, 2010 by Ian Whitaker 

Consumer Financial Protection Bureau to protect those with student loans, Director Elizabeth Warren says

Earlier this year, Congress successfully pushed through a sweeping financial reform bill that sought to correct many perceived imbalances in the financial regulatory infrastructure.

One of the stipulations in the legislation was the creation of a new oversight board for consumers, one that also included regulation of student lending and marketing practices.

In September, President Barack Obama announced Elizabeth Warren as the first director of the Consumer Financial Protection Bureau.

Warren was previously appointed by Sen. Harry Reid, D-Nev., to serve on the Congressional Oversight Panel, which reviewed the progress of the Troubled Asset Relief Program passed under the Bush administration.

After a brief period of organization and administrative groundwork following her appointment, Warren held a phone conference Tuesday with student journalists from around the country to clarify the new agency’s purpose and mission.

“I’m working hard to stand up the bureau,” she said in the conference. She likened the CFPB to a “tough cop on the
beat,” aimed at enacting real accountability and oversight.

The bureau, she said, seeks to ban arbitrary rate hikes, provide clarity on interest rates for students before they take out loans, and ensure that the power between borrower and lender is balanced.

“I believe in personal responsibility,” Warren said, “but I believe you need to be able to read the contract and assess the cost and risks in advance, and compare one product with another.”

A Gottlieb Professor of bankruptcy and commercial law at the Harvard Law School, Warren admitted that even she can’t read through the maze of legal fine-print that many students are forced to endure if they seek financial assistance from private lenders and banks.

Also included among the responsibilities of the bureau are reforms for overdraft fees and the methods by which universities disclose agreements with private lenders.

The bureau will review the procedures commonly used by banks to calculate student debt, as well as the methods by which that debt is collected.

A major goal of the new agency is to give students the information they need to make good financial decisions, she said.
“We will empower young people to make smart choices by promoting financial literacy and safeguarding retirement,
investment and, most of all, putting the right tools in the hands of students,” Warren said.

Warren believes that financial literacy is a major concern among Americans today. “Americans need more financial education, more information on how to survive in a complex financial world,” she said.

The bureau aims to address this, she explained, by developing new approaches to financial literacy and by making finance
more approachable and relevant.

“It should not be the case that people who are trying to make good decisions get sucked into the wrong debt and are hounded for life,” she said. “It’s just wrong.”

Warren said it is the job of her newly commissioned agency to put a stop to these practices and to say “no more.”

She also said that it is the concern of the government that the playing field be level and not choked with fine print. “Too many responsible young people [have paid] the price for an outdated regulatory system,” she said.

During the phone conference, Warren also praised the passage of the Credit CARD Act in early 2009, which established
new regulations over credit card companies.