Consumers could win big if Dodd's financial reform package becomes law
Filed under: Banks, Credit, Debt, Recession, Credit Cards
Senate Banking Committee Chairman Chris Dodd unveiled his financial reform package on Tuesday and consumers could win big if the bill becomes law. Dodd proposes a strong Consumer Financial Protection Agency whose sole job will be to protect American consumers from fraud and abuse. He wants to be sure people get the clear information they need on loans and other financial products from credit card companies, mortgage brokers, banks and others. Dodd introduced the bill along with fellow committee members Jack Reed, Charles Schumer, Robert Menendez, Daniel Akaka, Jon Tester, Mark Warner, Jeff Merkley and Michael Bennet -- all Democrats, so at least it looks as though this may be a partisan effort, but the issue is so important I hope it can become a bipartisan bill.
In introducing the bill, the Senate Banking Committee members issued a statement saying they believe "American consumers already have protections against faulty appliances, contaminated food, and dangerous toys. With the creation of the Consumer Financial Protection Agency, they'll finally have a watchdog to oversee financial products, giving Americans confidence that there is a system in place that works for them – not just big banks on Wall Street."
They went on to say that, "The economic crisis was driven by an across-the-board failure to protect consumers. When consumer protections are handled by regulators whose primary responsibility is to safeguard the profitability of the companies they regulate, consumer protections don't get the attention they need. The result has been unfair, deceptive, and abusive practices being allowed to spread unchallenged, nearly bringing down the entire financial system."
Committee members also believe a new Consumer Protection Financial Agency is needed because the Federal Reserve, which was the primary consumer protection rule-writer, repeatedly failed to act in the consumers best interests and because the Federal Trade Commission, while responsible for consumer protections for non-bank finance companies, lacks the authority and capacity to examine these non-bank entities.
As proposed by the Senate Banking Committee he Consumer Financial Protection Agency will:
- Consolidate consumer protection responsibilities currently handled by the Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation, the Federal Reserve, the National Credit Union Administration, and the Federal Trade Commission.
- Be led by a five-member board with an independent director. The Chairman of the Financial Institutions Regulatory Administration will have a seat on the board.
- Unite rule-writing, supervision, and enforcement for consumer protection in a single, stand-alone agency with broad authority to investigate and react to abuses as they develop.
- Lookout for bad deals and schemes. Consumers won't have to wait for Congress to pass a law to be protected from bad business practices.
- Create a new Office of Financial Literacy.
- Level the playing field for insured banks by regulating the shadow banking industry, such as mortgage brokers and payday lenders, for the first time and ensures that companies offering customers the same products receive the same regulatory treatment.
- Make one agency accountable for consumer protections. In the past many agencies shared responsibility. It was hard to know who was responsible for what. Problems often fell through the cracks because no agency had direct responsibility.
- Allow states to pass tougher consumer protections that apply to all lenders, preventing federal regulations from preempting stronger state laws.
- Coordinate with other regulators when examining banks to prevent undue regulatory burden.
- Focus resources on companies that pose the biggest risk to consumers - mortgage bankers, brokers, finance companies and the largest institutions.
Lita Epstein has written more than 25 books including The Complete Idiot's Guide to Improving Your Credit Score.
Reader Comments (Page 1 of 1)
11-11-2009 @ 8:30PM
George said...
You must be kidding!
All this will do is provide cover for the major banks, and leave the small banks slowly hanging in the breeze.
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11-12-2009 @ 8:40AM
rod said...
Lita,
Contrary to common belief, it was the Congress, specifically the Democrats in charge, that caused the housing trouble we are in now. They were warned more than once (see CSPAN) and they denied anything was wrong. It was as if they wanted it to happen to anger people against the then president to grab more power. Now, we are at the mercy of a power group that is dangerous. It is less likely that Dodd's plan is to help us and more likely that it is some power scheme. It is really difficult to trust any of them. All they seem to care about is their agenda - pushing forward knowing that they can do it but not asking the question if they SHOULD make all these sweeping changes. All the while the tsars find the Constitution an inconvenience? People better wake up and realize that it is that document that is the only thing protecting them from the crazy ideas they have imbedded in their plans for change.
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11-12-2009 @ 10:33AM
Mark D said...
On topic:
There definitely needs to be both a CFPA and a push for better financial literacy in this country. Better-educated financial consumers should lead to less predatory lending (or at least make it harder), and consumers need someone on their side to help stand up to huge institutions that have proven themselves willing to do darn near anything to boost their bottom line.
But a single super-regulator really isn't necessary. Simply change the way regulators work: stop having them compete for business, promising to be easy on a bank if the bank pays its fees on time. Put real teeth behind enforcement, breaks for helping their communities (financial education, homeowners' classes, volunteerism, etc.), and streamline the review and audit process by consolidating some of the layers (e.g., OTS, CRA and SOX are all separate; make them a combined audit).
Sorry for the thesis. :-)
A bit off topic:
Contrary to common belief, it was the Congress, specifically the Democrats in charge ...
--rod
Hmmm ... that's funny. Last I checked Republicans were actually in charge during the build-up to the housing bubble (2000 - 2007), were the ones pushing for deregulation of the secondary securities market (Gramm-Leachy), and were the ones too busy worrying about gay marriage than making sure economic success isn't concentrated at the top 1% of the income bracket.
Oh, and the the right sure didn't whine much about creating the Dept. of Homeland Security, the biggest, most bloated, and ridiculous dept. we currently have, nor did they complain much about Bush's 30+ "czars," so ... well, consistency in argument would be nice.
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11-12-2009 @ 11:02AM
Cooper said...
I still say anyone who makes $20k/year and buys a $500k house is an idiot. You can't fix stupid. You definitely can't legislate it out of existance. I think all the money spent on whole new government agencies might be better spent in our existing schools.
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