Warren Says Technology Can Prevent `Capture' of Consumer Protection Agency

Elizabeth Warren, the special adviser assigned to help set up the Consumer Financial Protection Bureau, said she is planning to use technology to prevent “capture” of the new agency by the industry it’s being created to oversee.

The regulator will “use supervision and lawsuits to enforce the law” while employing technology to “supplement the cop on the beat by building a neighborhood watch,” Warren said today in remarks prepared for delivery at the University of California at Berkeley. 

“The new consumer agency can develop the tools to level the playing field and discourage capture,” Warren said. “The American people can have not just one but thousands of seats at the table” with the help of technology, she said.

Warren, who planned to meet with technology industry executives and visit Google Inc. during her trip to the San Francisco Bay area, said using “a well-informed population to help expose, early on, consumer financial tricks” could create an additional safeguard against problems such as the documentation lapses that led mortgage-servicing firms to temporarily halt foreclosures. 

“Think about how much sooner attention could have turned to foreclosure documentation -- robo-signers and fake notaries - - if, back in 2007 and 2008, the consumer agency had been in place to blow the whistle before the problem became a national scandal,” she said.

Industry View 

The financial services industry “pushes its views and, as you might expect, the right direction turns out to be the one that is good for the industry,” Warren said. “That’s the industry’s right, but for the American public, those who aren’t hiring lawyers and lobbyists, the field is tilted against them.”

Warren said crowd-sourcing -- in which technology is used to query large groups of people for answers to complex questions -- could be used by the bureau to harness information from consumers.“Imagine scanning a credit agreement and uploading to a website where software can analyze the text,” Warren said. “A consumer could help the agency spot new agreements on the market and customers who could get more information as they make decisions.”

She said the bureau could build on the precedent of the Credit Card Accountability and Disclosure Act, which requires card issuers to give their credit agreements to the Federal Reserve, which posts them on the Internet.

Warren was named in September as an assistant to President Barack Obama and a special adviser to Treasury Secretary Timothy F. Geithner to help shape the consumer agency that will be housed at the Fed.

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