AFFIL Applauds the Administration's Plan to Create a Consumer Watchdog Agency
Today President Obama gave a brief speech about his Administration’s plan to overhaul regulation of the financial industry. One of the points in his five-point plan is to protect consumers and investors, and the main way he proposes enhanced consumer protection is the creation of a strong Consumer Watchdog agency.
In the Administration’s plan, the Consumer Watchdog agency is called the Consumer Financial Protection Agency (CFPA). (This is similar to the agency we’ve been calling the Financial Product Safety Commission.) The CFPA would be a massive improvement over the status quo simply because consumer protection would be its raison d’etre.
AFFIL likes the description of the CFPA contained the Administration’s white paper (PDF). It speaks to at least nine out of our Ten Principles of Re-regulation. To tell Congress you support this idea, click here.
Here are some of the highlights of what we like:
- The CFPA would cover all lenders – not just banks – including payday lenders, auto title lenders, finance companies and mortgage companies. Mortgage companies in particular escaped regulation during the subprime boom, leading to the proliferation of toxic mortgages. As a result, we’re seeing a new foreclosure filing every 13 seconds and the destabilization of the economy at large.
- The CFPA would eliminate lender “charter shopping,” where lenders choose the regulator with the weakest standards. It wouldn’t be incentivized to weaken its standards to attract more charters (and more dues) since all lenders would fall under its jurisdiction.
- The CFPA would not preempt good state laws, and would be encouraged to work with state Attorneys General and other agencies. It would create a floor of regulations which states could strengthen to protect their residents, but not a ceiling.
- The Administration would encourage the CPFA to investigate Forced Arbitration, a particularly heinous practice AFFIL and other groups vigorously oppose. If the CPFA’s investigation revealed that Forced Arbitration cannot be fair for consumers, it would have the authority to ban it altogether.
- The CFPA would be concerned with consumer protection as well as enforcing the Community Reinvestment Act AND fair lending laws. Fair lending laws were written to make sure lenders don’t discriminate against people of color, but they have never been enforced.
- Lastly, unlike the legislative process or the current convoluted regulatory process, the CFPA would be able to act quickly to oversee emerging products, practices and markets to ensure their safety for consumers.