CFPA Advances as Dangerous Toasters are Recalled

Yesterday, the Obama administration sent Congress a proposed bill that would establish a Consumer Financial Protection Agency.   The key points of the proposal are summarized in this informative press release and the complete 152-page bill is available here (pdf). 

The proposed agency which would have the power to make and enforce rules prohibiting a wide range of lending practices that are harmful to consumers, including predatory home mortgage lending, forced arbitration clauses in credit card contracts, and abusive features of private student loans.  These federal rules and regulations would establish a national floor, and would not prevent states from protecting their own residents with stronger rules.   

AFFIL and our Partners are strongly supportive of this proposal (see this previous post), while the industry is mobilizing against it.  Barney Frank, chair of the House Financial Services Committee, has indicated that his committee will act on the bill before Congress’s August recess.  We’ll keep you posted as the summer proceeds. 

The idea of such a commission was first proposed by Harvard Law Professor Elizabeth Warren who, in a 2007 article, famously contrasted consumers’ inability to buy toasters that would have a one-in-five chance of bursting into flames and burning down their homes with the ready availability of toxic mortgage loans having a one-in-five chance of resulting in the loss of their homes through foreclosure.  

It turns out, however, that you CAN buy toasters that threaten to burn down your house.   In fact, just this month, the Consumer Product Safety Commission announced that

W.P. Appliances is voluntarily recalling about 1,500 Wolfgang Puck Toaster Oven/Toasters. The toaster oven can remain “on” after the toast pops up, posing a fire hazard.

The difference, of course, is that there are standards in place, and that the toasters are being recalled.  Meanwhile millions of toxic mortgages are still out there.

(photo: Donovan Govan)