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The new Consumer Financial Protection Bureau said on Monday it would coordinate rulemaking and enforcement with the Federal Trade Commission to avoid duplication.
Richard Cordray, the recently appointed director of the CFPB, and FTC Chairman Jon Leibowitz signed a memorandum of understanding promising to inform each other before initiating an investigation or bringing an enforcement action.
The two also committed to consulting each other on rule-writing.
Republicans and business groups have warned that the CFPB, which opened its doors in July, could harm the U.S. economy by adding another layer of regulation that restrains the flow of credit.
“Entering this agreement with the FTC is important to making sure markets for consumer financial products are getting efficient and effective federal government oversight,” said Cordray, who was installed through a controversial recess appointment earlier this month.
Leibowitz said in the same release: “Now we have another cop on the beat, and this agreement ensures that businesses will not be double-teamed by the two agencies.”
The CFPB was created by the Dodd-Frank financial reform law of 2010 to police consumer financial products such as mortgages and credit cards.
Dodd-Frank requires the CFPB and the FTC to work together to coordinate enforcement and promote consistent regulatory treatment of consumer financial products and services.
The Chamber of Commerce, a key U.S. business lobbying group, called the agreement “a mixed bag.”
“We still have serious unaddressed concerns about business’s ability to get clear direction from their government,” Jess Sharp, director of the Chamber’s Center for Capital Markets Competitiveness, wrote in a blogspot, still calling the memo a “good faith effort” by regulators.
Since it began operating in July, the CFPB has had the power to supervise traditional banks and enforce existing federal consumer protection laws, such as the Truth in Lending Act.
Now that the agency has a director, it can draft new rules for non-bank financial companies, such as payday lenders, mortgage servicers and private student lenders.
Cordray’s appointment has come under fire from Republicans and business groups who argue President Barack Obama may have violated the constitution by installing him through a recess appointment when the Senate was not technically on recess.
Appointments to the National Labor Relations Board made by Obama the same day have already been challenged by the National Federation of Independent Business, a small-business lobby.
The House Judiciary Committee said on Monday it would hold a hearing to investigate the constitutionality of the appointments, which Democrats argue were necessary after Senate Republicans blocked a vote on the nominees.
(Reporting By Alexandra Alper; Editing by Andre Grenon and Steve Orlofsky)