Here's a potent illustration, provided by the Consumer Federation of America, of one benefit of the proposed Consumer Financial Protection Agency, which was approved by a House panel today by a vote of 39-29. What's that benefit? Simplicity.
The CFPA would consolidate much of the regulation of consumer financial products and services under one agency, rather continuing with the convoluted system that exists today. One regulator handling many functions could better ensure a more efficient, less redundant regulatory system.
As proponents such as Harvard Law Professor Elizabeth Warren have noted, today's rat's nest of regulators has allowed many financial companies to cherry-pick for the least restrictive overseer. Other financial companies have escaped any meaningful regulation at all. Those situations helped contribute to the unbridled marketing of dicey consumer financial products that led many families astray in the last couple of years.
To be sure, the CFPA, in its current bill form, isn't as attractive as it was when it was first introduced earlier this year. While small banks (those with less than $10 billion in assets) and small credit unions (those with less than $1.5 billion) would be covered by rules the CFPA created, the enforcement of those rules would remain with their current regulators. But larger institutions, which control 77 percent of assets and 74 percent of deposits, would be governed by the CFPA. The shenanigans of those institutions have been cited as major causes of the past year's national financial fiasco.
Auto dealers also would not be under the new agency's aegis, in spite of efforts by numerous organizations, including Consumers Union, to include them. The CFPA also would not regulate mortgage, title, and credit insurance, and a majority of retail transactions involving credit.
Even with its shortcomings, the CFPA still would be an improvement over the current system. For more on the benefits of a strong CFPA and effective overhaul of the nation's financial system, check out the links below from Consumer Reports, and DefendYourDollars.org, the Web site of our Consumers Union advocates on the front lines:
Austan Goolsbee explains the CFPA
Reports on failed banks show shoddy oversight
Prof. Elizabeth Warren on why we need the CFPA, Part 1
Prof. Elizabeth Warren on why we need the CFPA, Part 2
Prof. Elizabeth Warren on why we need the CFPA, Part 3
Prof. Elizabeth Warren on why we need the CFPA, Part 4
Why do we need a CFPA? To squelch $31 billion a year in bank fees
Is the proposed Consumer Financial Protection Agency elitist?
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