So she got the job. What should she do with it?
Elizabeth Warren will serve as an assistant to the president and a special adviser to Treasury Secretary Timothy F. Geithner on Friday.
Ron Lieber writes the Your Money column, which appears in The Times on Saturdays.
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The appointment of Elizabeth Warren as an assistant to the president and a special adviser to Treasury Secretary Timothy F. Geithner, announced on Friday, makes it pretty obvious how special the circumstances were that surrounded it. Consumer groups hoped she would become the director of the new Consumer Financial Protection Bureau, the job title named in the law that created the bureau. But the White House chose a more indirect appointment to avoid a confirmation battle with lawmakers who argue that she’s a bank-slaying radical.
Whatever she’s called, however, there is plenty of work awaiting her. A couple of big pieces of recent legislation have accomplished a lot already. The Card Act, for instance, made it much harder for people under the age of 21 to get credit cards and required banks to get permission before letting consumers spend more than their credit limits (and charging them lots of fees for the privilege).
The financial overhaul law that created the new bureau, meanwhile, also ushered in new mortgage rules. Mortgage brokers and bankers, for instance, can no longer earn bonuses for putting people in higher-priced loans.
Consumer advocates and industry experts still see plenty of questionable corporate practices worthy of Ms. Warren’s attention.
I asked her to provide her own priority list, but she declined. “Thanks for the offer,” she wrote in an e-mail, “but I can’t say anything about anything.”
So this week, with the experts’ help, I came up with a list of seven tasks she might turn to first. Opponents will challenge her authority to take on these sorts of things, but she’ll probably have her way with some of them given her history of tenaciousness.
So here we go:
STUDENT LOANS Universities often don’t know how many loans students have applied for. That makes it much harder for them to provide counseling, say, to let students know that they’re still eligible for additional federal loans that are cheaper or have better terms than private ones.
So every lender could report every private student loan to a student’s college or university. This is not controversial; banks themselves are in favor it, as Lauren Asher of the Project on Student Debt noted this week. That makes this move an easy call for the bureau.
DEFAULT DISCLOSURE If 10 or 20 or 50 percent of all students at a particular institution are defaulting on their student loans, students ought to know that before choosing to take on their own pile of debt. So the bureau could ask every college and university to disclose its students’ federal and private loan default rates on its financial aid applications and enrollment forms, along with averages from a group of similar schools.
This way, students will know the odds before they take on debt to attend, say, a for-profit trade school.
FREE CREDIT SCORES The basic problem in the credit reporting world is that consumers still don’t have free, unlimited access to the information that companies and employers use to judge them.
For some time now, consumers have been able to get one free copy of their credit report each year from the three biggest credit bureaus that produce them, Equifax, Experian and TransUnion.
But each of those companies also creates its own version of the FICO credit score, the mystifying figure that many lenders use to judge applicants. Given that lots of companies judge consumers purely on their scores without ever looking at their underlying credit report, people ought to be able to get their scores free once a year as well.
ANOTHER OPTION FOR SCORES If free scores do not become available, John Ulzheimer of Credit .com would like to see a centralized bazaar where all scores that lenders tend to use are available for sale to consumers.
He would force the credit bureaus to disclose their market share, too, so consumers buying scores would know which were most popular with lenders.
LENDER GUIDANCE Or how about making it easier on consumers who want to see their data before landlords, lenders or employers do so? Those parties could disclose, upfront, which credit scores or reports they plan on checking. That way, consumers can do their own checking ahead of time and perhaps delay applying until they’ve made improvements or fixed errors in their credit reports.
Nobody’s asking for proprietary underwriting criteria here, just the sources of data. Disclosing it hardly equates to the revelation of state secrets.
BUSINESS CREDIT CARDS There’s a big loophole in the Card Act, namely that not all cards are covered by it.
Small-business credit cards of various sorts are exempt, which means banks that issue them don’t have to follow new rules that limit how quickly card companies can raise interest rates or fees. But many consumers see no difference between the commercial card products and the ones consumers use. Some card companies, in fact, seem to encourage the fuzziness by sending applications for small-business cards directly to consumers’ homes.
In the second quarter of 2010, card issuers sent about 60 million promotions for small-business and other similar cards to consumers’ homes, according to Mintel Comperemedia. While that’s a small fraction of the 1 billion total card solicitations that landed in residential mailboxes in that period, plenty of consumers don’t realize that they are supposed to be business owners before applying for these cards.
Other card applicants fib to get the perks that come with some cards, and the issuers may not check to see if they really own businesses. Only later do the cardholders realize that the new Card Act rules may not apply to these cards.
In late 2008, Dave Hanson, who lives in Seattle, discovered that his card issuers had started reporting the activity on his business cards to the bureaus that generate his personal credit reports. If they can turn that information over, he argues, it makes the small-business plastic a de facto consumer card.
So shouldn’t the “business” cards also be covered by legislation that protects consumers’ cards? The consumer bureau could probably erase this false distinction pretty quickly.
MORE 45-DAY WARNINGS Mr. Ulzheimer also urged the new bureau to require card companies to give consumers 45 days’ notice before lowering their credit limits, the same amount of warning they now must give before increasing an interest rate or annual fee or other charge. After all, a lower limit could cause a drop in your FICO score, which can be a problem if you’re applying for a mortgage. Or how about 30 days at least?
Which of these priorities will make Ms. Warren’s own to-do list? She now has a bully pulpit, and she could use it to prevent the return of the kinds of mortgage abuses that got us to this financial mess. It also wouldn’t hurt to do something to make the blizzard of mortgage forms and fees more clear.
If her past tendency toward bluntness holds, she’ll have a lot to say soon enough The resulting debates over just how far she can go will be awfully fun to watch.
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