- Associated Press - Wednesday, January 4, 2012

With its first chief now in place, the new Consumer Financial Protection Bureau will start enforcing rules aimed at reining in abusive mortgage servicers, student lenders and payday-loan companies.

It will be months, though, before the agency can police other areas of consumer finance, such as debt collection and credit-reporting bureaus.

On Wednesday, President Obama used a congressional recess appointment, a move Republicans immediately denounced as an illegitimate usurpation of Congress’ ability to determine whether it is in recess, to install Richard Cordray to lead the consumer finance watchdog. The bureau was created in July as part of the 2010 overhaul of the nation’s financial regulations.

The idea behind the new agency was to prevent financial companies from exploiting consumers. In the past, only banks were subject to examination by federal financial regulators. And until now, with no permanent director, the bureau had authority to supervise only big banks.

Mr. Cordray, a former Democratic attorney general of Ohio, said he would immediately “begin working to expand our program to non-banks, which is an area we haven’t been able to touch up until now.”

That change will likely start within weeks. Agency officials who are supervising big banks have already been trained to examine non-bank financial firms.

Still, some areas of consumer finance will remain outside the bureau’s reach. Aside from payday, mortgage and student loan companies, the consumer protection bureau can supervise only non-bank companies it defines as “larger participants” in their markets.

In June, the agency sought public comments on a proposal to supervise major debt collectors, credit reporting bureaus, check cashers, issuers of prepaid debt cards and debt-relief companies. The comment period has ended, and the agency is reviewing the responses. It’s not clear how long the review will take.

Once the comments have been reviewed, the proposal must be revised, subjected to further public comment and then approved by the White House. This could take months or years. If the agency’s proposal is approved, it will be able to send inspectors to credit bureaus and others that meet the “large participant” definition.

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