The Loan Shop

New federal watchdog protects consumers in loan, credit deals

A federal watchdog agency created to protect Americans from credit trickery opens shop this week.

When it opens it on Thursday, the Consumer Financial Protection Bureau will be able to supervise the nation's biggest banks, respond to consumer complaints about surprise credit terms and hidden loan fees, and sue institutions that violate credit card, mortgage and truth-in-lending laws.

But the bureau continues to dodge grenades from the U.S. House.

And until it gets a director, its authority over lenders who aren't currently regulated -- payday loan stores, finance companies and prepaid card issuers, for example -- may be limited to really scary growls.

Despite its travails, the embattled agency's staff has several big projects under way, including a redesign meant to make mortgage disclosures easier to read and research that eventually could help consumers get more information about their credit scores.

Here's what consumers can expect from the bureau in its first week and some of the landmines that lie ahead.

A soft launch The Consumer Financial Protection Bureau plans a "soft launch" – Capitol speak for "low fanfare" -- in large part because it remains politically vulnerable without a director.

Right away, the bureau will field consumer complaints it previously had to pass along to other regulators. A beta version of its complaint software could go up at consumerfinance.gov even before it opens, possibly as early as today.

At first, the agency will accept complaints only about credit cards. As it works out kinks in the system and hires additional staff, the bureau plans to accept complaints about mortgages and then broaden to other financial products. Technophobes, fear not: The bureau plans to set up a toll-free phone line.

A bureau report on credit scores is due to Congress by Thursday. That report explores variations in credit scoring formulas and looks at whether consumers are harmed because the "educational" credit scores sold to them are calculated in a different way than scores sold to creditors.

The bureau also is in the midst of a project to streamline mortgage disclosure forms. (See the prototypes on its website.) It wants to combine two multipage forms (both required by law) into a single easy-to-read form that's shorter and more useful to home buyers trying to compare loans.

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