WASHINGTON Feb 1 The U.S. consumer watchdog is
considering broadening its reach beyond mortgages and credit
cards, including a potentially controversial push into
retirement savings accounts.
The Consumer Financial Protection Bureau has checked off its
list many of the steps the 2010 Dodd-Frank law required it to
take. Now the bureau could expand its authority to new products,
despite pressure from Republican lawmakers to scale back its
powers and questions surrounding its director's validity.
According to people briefed on the CFPB's progress, the
agency is studying possible forays into retirement savings
accounts, mobile payments and the "new subprime," or people who
no longer have good credit because of the financial crisis.
The most contentious could be the retirement savings
industry. Consumer advocates say retiring workers can be subject
to scams or steered into costly products, and industry experts
say existing regulations for people who provide financial advice
leave loopholes that can create problems for retirees.
While it seems like a prime target for the bureau, multiple
regulators already oversee the industry, raising jurisdictional
questions. And the industry would likely fight the intrusion of
"I do think that them looking at what's going on in the
retirement world could be productive from a consumer protection
point of view," said Ed Ferrigno, vice president for Washington
affairs for the Plan Sponsor Council of America.
"While we think they might be able to play a positive role,
we certainly wouldn't welcome a new set of rules and a new
regulator," he said.
A spokeswoman for the bureau declined to comment. CFPB
Director Richard Cordray told Bloomberg News the bureau was
exploring what authority it might have over retirement savings
but did not specify potential actions it could take.
The Dodd-Frank law directed the consumer bureau to write
rules, bring enforcement actions and educate consumers about
mortgages, overseas money transfers and other products.
The bureau has been a source of controversy since its
formation, as Republican lawmakers and business groups claim it
has too much power and too little congressional oversight.
Republicans refused to confirm a director until Democrats
agree to change the CFPB's structure, so President Barack Obama
used a procedural maneuver last year to give Cordray the helm.
Republicans now question whether his appointment was valid, and
a federal appeals court last week struck down a similar use of a
The bureau has focused much of its efforts on education and
could continue on this path by gathering information for workers
and retirees about investment strategies. Dodd-Frank created an
Office for Older Americans within the CFPB to work on improving
seniors' education about and options for long-term savings.
Asserting itself as a regulator could be more problematic.
The U.S. Department of Labor already oversees most pension
plans. Large independent advisers are regulated by the
Securities and Exchange Commission; state regulators oversee
smaller firms. Commission-earning brokers are regulated by the
SEC and the Financial Industry Regulatory Authority.
Dodd-Frank contains a number of exclusions that would limit
the bureau's authority over investments, including exempting
entities regulated by the SEC from the CFPB's oversight.
A spokesman for the SEC declined to comment. A DOL spokesman
said the department and the CFPB have held forums on retirees'
financial literacy but would not comment further.
People briefed on the CFPB's work said the bureau is in the
early stages of looking into the subject and is still
considering whether to make retirement savings a priority.
Cordray said in a speech last summer that the bureau was
interested in certifications obtained by financial planners and
advisers who work with older people.
A variety of credentials exist for financial advisers,
including designating those who work with older people, and some
are more difficult to obtain than others. Cordray did not
specify which credentials the bureau wanted to study.
"We want to know where these designations are coming from
and whether or not older Americans and their families can easily
find out which designations are legitimate," he said.
Consumer advocates say workers face problems at the point at
which they retire or leave their jobs and move money from
employer-based accounts, such as 401(k)s, to individual
accounts. This has been called the "rollover moment."
Companies that manage 401(k) accounts often also offer
rollover accounts and investment products that workers could use
when they leave their jobs. Those companies may steer retiring
workers into their products rather than explaining all of the
"There's a captured audience that you have if you are a
recordkeeper or any type of administrator," said Norman Stein,
senior policy adviser for the Pension Rights Center.
Workers also seek advice when they must choose between a
lump sum payout or lifelong monthly payments. Financial advisers
may have an incentive to recommend that workers take the lump
sum so they can manage it.
The Labor Department and SEC have already taken some steps
toward closing such loopholes, working on parallel rules that
would impose a so-called fiduciary standard requiring advisers
to act in clients' best interest.
The department plans to re-propose rules to require advisers
who counsel employees on retirement plans to be fiduciaries. The
SEC is considering writing uniform rules for independent
financial advisers and for retail stock brokers.
The industry would likely fight an attempt by the CFPB to
add to the regulatory burden by introducing its own rules.
John Woerth, a spokesman for investment management company
Vanguard, said the Labor Department and SEC already protect
retirement plan participants and IRA investors.
"There is no need for additional regulation that would
encumber the system with additional cost and complexity," Woerth
said in an email.