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We’re now bringing you Consumer Protection information and news and wanted to let you know the status of a newly pending federal agency, the Consumer Financial Protection Agency or the CFPA.
What will the Consumer Financial Protection Agency do?
As part of President Obama’s plan to overhaul the loan and credit industries, one role of the Consumer Financial Protection Agency will be to write many new rules aimed at protecting consumers in the areas of loans and credit.
President Obama has said of the agency, “The Consumer Financial Protection Agency will prevent predatory lending practices and other abuses and will ensure that consumers get clear information they can understand about financial products like credit cards and mortgages.”
Arguments for the new agency say that it is desperately needed as banking regulators have not fairly protected consumers. On the other side, some argue that such an agency would increase the government’s reach and limit consumers input while strangling businesses.
“It’s not about protecting consumers; it’s about a new government bureaucracy making decisions for us,” said Rep. Spencer Bachus of Alabama on the House Financial Services Committee.
The House Financial Services Committee voted 39 to 29 in favor of the agency. The agency was not favored by Republicans and was lobbied against by banks and businesses. The votes fell closely along party lines but Democrats Walt Minnick (Idaho) and Travis W. Childers (Mississippi) voted against the bill and Republican Michael N. Castle (Delaware) was the lone Republican who supported the measure. The bill survived the first cut but not without some excisions.
The Highlights of the legislation approved to create a Consumer Financial Protection Agency:
-The Consumer Protection Agency would oversee common financial products like mortgages, credit cards, payday loans and savings account terms.
– The agency would also be in charge of implementing a law passed earlier this year by Congress that protects consumers from sudden interest rate increases on unpaid credit card balances.
-The agency would be able to ban products and practices determined to be “unfair, deceptive or abusive.”
– Only banks with more than $10 billion in assets would fall under the management of the Consumer Protection Agency. Most banks and credit unions would remain under the monitor of regulators.
-Retailers are exempt but the financial institutions that offer a store-brand credit card or the institution that provides financing for those such as auto dealers would still be subject to new agency rules.
-New powers will be granted to state attorneys general to write tougher rules within their state and offer increased enforcement.
What didn’t make the cut in the bill?
President Obama’s administration wanted a mandate that banks offer what has been referred to as “plain vanilla” products, such as a 30 year fixed mortgage.
Another proposal that was cut was a line referring to reasonable steps to ensure that customers understand what they are buying. Democrats argued that this was simply too difficult to enforce.
We’d love to hear from you. In light of the recent banking scandals, are you in favor of an overseeing agency such as the Consumer Financial Protection Agency? Does anything impress you that you’ve heard so far? On the other hand, does anything about this new agency scare you?