Reform Reading: Consumer agency eyes crowdsourcing to police industry

Introduction

Elizabeth Warren, the White House adviser mapping out the Consumer Financial Protection Bureau, wants to shake things up by using crowdsourcing as one of the tools to collect information about deceptive financial practices. In an interview with the National Journal, Warren said such techniques could help the agency spot new enforcement targets in just days – not months or years, which is how long federal agencies now take to address problems.

For example, consumers could use camera phones to document the fine print included in a bank checking account statement and email it to the agency. “The power of enforcement will be partly about the agency. But it will be partly, in the future, be about how people crowdsource around identified problems,” said Warren, who plans to meet with Google officials this week.

Adviser to Warren worked for online lender

Speaking of Elizabeth Warren, one of her own advisers was an investor in a company that helps arrange low-doc loans for consumers with poor credit histories, according to the New York Times. Rajeev Date was a director of Prosper Marketplace Inc., an online lending platform that matches consumers seeking loans with lenders. In its first four years of operation, more than 25 percent of the loans it helped arrange went into default, according to a story in the newspaper. Date resigned from Prosper Marketplace before Warren hired him as an adviser, and there is no evidence he violated any ethics or disclosure rules.

Wall St. banks disguise proprietary trading

One of the biggest fights in writing the Dodd-Frank bill was over the so-called Volcker Rule, which limits banks’ risky proprietary trading for their own accounts. So why have banks gone quiet about this since the bill became a law in July? Bloomberg columnist Michael Lewis says it’s because banks have absolutely no intention of halting this kind of lucrative trading, and are simply going to give it a new name. One trader was quoted as saying he will use a loophole to continue proprietary trading by arguing that he bought the position to offer liquidity to a customer who wanted to sell the position.