Elizabeth Warren needs to kick some serious financial booty.
There it is — my advice to the nation's new consumer czar. Warren is now in the process of setting up a Consumer Financial Protection Bureau, which will oversee credit cards, mortgages and other meat-and-potatoes money matters.
Congress has granted the bureau fairly broad powers to safeguard ordinary folk from the more rapacious and abusive practices of banks and other financial-services companies, such as payday lenders.
But that doesn't mean Warren & Co. will have an easy time of it. The banking industry fought establishment of a new watchdog agency every step of the way. It won't willingly roll over and acquiesce just because there's a new sheriff in town.
"There is a very powerful alliance that's formed to compromise the ability of the bureau to do what it's supposed to do," said Sally Greenberg, executive director of the National Consumers League.
Bank lobbyists are working aggressively to water down rules and regulations taking shape under the bureau's jurisdiction, she said. The goal, Greenberg said, is to give lenders and other financial firms as much wiggle room as possible to maintain business as usual.
Warren offered an olive branch in a speech Wednesday to the Financial Services Roundtable, an industry group. She said her goal isn't necessarily to put bankers on a tight leash.
"Instead of creating a regulatory thicket of 'thou shalt nots,' and instead of using ever more complex disclosures that drive up costs for lenders and provide little help for consumers, let's measure our success with simple questions," Warren said.
"Can customers understand the product, figure out the costs and risks, and compare products?"
These are indeed the right questions, and it's admirable that Warren is trying to mend fences with an industry that worked hard to vilify both her and the agency she now oversees. But the clock is ticking.
"The agency will have to prove its mettle within a year or people will say it's a waste of money or bad for business," said Travis Plunkett, legislative director for the Consumer Federation of America. "This agency is going to have to be visible, and it's going to have to be effective."
He and other consumer advocates say the first major tussle Warren will have with banks is working out some of the nuts and bolts of the Credit Card Accountability, Responsibility and Disclosure Act, which was signed into law last year and has been adopted in stages.
Among other things, the law limits how and when card issuers can hike interest rates, and requires at least 45 days' notice before changes can be made. It also mandates clear disclosure of terms and conditions.
But that's where the battle lines are being drawn. What consumers might view as clear disclosure might not be the same as what banks feel is necessary. Should everything be up front in boldface print, or are a few asterisks and footnotes permissible?
Is it sufficient for a bank to generally say how long it could take to pay off a credit card balance if someone makes only minimum payments, or should each monthly statement be tailored for each customer's circumstances?
Banks obviously want to maintain the status quo as much as possible. Warren, her attempts at détente notwithstanding, needs to make clear that the status quo isn't good enough.
So her first order of business will be to draw a line in the sand and let banks know that her agency takes its mission seriously and will fill in the gaps in regulatory scrutiny that were routine under the old system, when industry oversight was parceled out among half a dozen agencies.
Credit card disclosures should be models of transparency. Asterisks and footnotes should be forbidden.
Warren isn't officially in charge of the Consumer Financial Protection Bureau — a director may not be chosen for months. But as the person tasked with putting all the Lego blocks in place, she has a unique bully pulpit from which to define both the agency's marching orders and the new regulatory landscape.
I can think of one area where I wouldn't mind seeing a little muscle: mandatory arbitration.
Many if not most financial-services companies require customers to agree to settle disputes out of court, denying them the right to a legal hearing or to join with other consumers in a class-action lawsuit. Because many professional arbitrators are financially beholden to the companies that routinely bring them business — i.e., banks — this makes for a decidedly uneven playing field.
Warren may not be able to fix this on her own, but she could be an agent of change and could call for lawmakers to address the issue, just as former Surgeon General C. Everett Koop used his prominence to fight tobacco companies and push for sex education in schools.
What else? Warren could focus her attention on so-called debt-settlement and credit-repair firms, which all too often take people's money for negligible help resolving debt woes.
If nothing else, all such firms should be required to show results before any fees are paid, rather than charging upfront for their services, regardless of whether they achieve any results.
On the mortgage front, how about reducing the vast amount of paperwork required for loans? Warren should call for a streamlining of the process, with standardized documents and requirements that force lenders to be more competitive in seeking people's business.
Consumer advocates are generally optimistic.
"The consumer movement has fought since 1978 to create an agency that has only one job — protecting consumers," said Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group, a watchdog organization.
"Lobbyists tried to kill this agency," he said. "They lost. We won."
Now we just need to see how big a victory that really is.