In light of the economic downturn and its connection to the housing market, the high rate of foreclosures and other financial practices, the Obama administration proposed in June a new federal agency to regulate the consumer marketplace in a variety of areas. As with any federal proposal, associations have weighed in on both sides.
The proposal, which has been introduced in the House as HR 3126, would create an agency called the Consumer Financial Protection Agency (CFPA) that would protect consumers from fraudulent financial practices and provide timely and concise information on best financial practices. The CFPA would have rulemaking authority and would be the primary enforcement authority for consumer protection statutes. It would draw existing authority from numerous agencies, but primarily the FTC. In exchange, the FTC would still be permitted to enforce consumer protection statutes not acted upon by the CFPA and would fall under streamlined regulatory procedures. You can read a concise outline of some of CFPA’s authority here.
Supporters of the legislation argue that the economic downturn is directly tied to the practices of financial institutions, and more strenuous government oversight is required to check these practices. The American Association for Justice, the association representing America’s trial lawyers, is a member of the Fair Arbitration Now Coalition, which argues that the “forced arbitration” clauses in many consumer contracts (like credit card bills) makes many financial contracts one-sided and unfairly gives the advantage in disputes to the company, not the consumer. You can read more about the coalition’s testimony before the Senate Banking Committee here.
Other associations are equally concerned about financial malpractice, but argue that the CFPA would compound, not solve, the problem. The US Chamber of Commerce and other trade associations sent a letter to the House Financial Services Committee (which is the committee of jurisdiction for HR 3126) arguing that more time and debate is needed to determine the impact of the legislation on business practices. For example, the letter contends that the legislation gives the agency broad oversight without an adequate check to their rulemaking authority, thus allowing the agency to create new rules without adequate vetting.
Do you think the proposed Consumer Financial Protection Agency is a good idea?
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