Dodd Bill Offers Compromised Consumer Financial Protection Agency
Consumer Financial Protection Agency would be beholden to existing regulators
WASHINGTON, March 15 /PRNewswire-USNewswire/ -- The financial reform proposal that will be introduced by Senator Dodd today creates a weak Consumer Financial Protection Agency (CFPA) that will not provide the consumer protection needed in the wake of the financial crisis. NCRC president & CEO John Taylor made the following statement relative to the consumer protections in the bill:
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"Senator Dodd's bill fails to ensure a regulatory framework that will provide strong protections for consumers. In particular, placing the CFPA at the Federal Reserve and giving existing financial regulators veto power undermines the goal of protecting consumers. This proposal gives the appearance of providing consumer protection, while leaving the real power in the hands of the bank regulatory agencies that failed to protect American consumers because they were too busy listening to Wall Street."
"If the intention was a compromise on the independence of the agency, then why do it twice over? Putting the agency at the Federal Reserve and giving the systemic risk council veto power ensures that this agency will be totally hamstrung by the very agencies that failed to prevent this crisis in the first place. Does anybody believe that the Director of the CFPA will be 'independent' with Secretary Geithner and Chairman Bernanke breathing down their neck? These are two of the most powerful decision makers in the Western Hemisphere, and it would be naive to think that they won't exercise their power over the CFPA, given the proximity and veto power they've been granted."
"Those who worry that consumer protections will undermine systemic risk should take note that it was the very absence of consumer protections that created the financial crisis in the first place," Taylor said.
On Friday, a group of 18 current and former members of the Federal Reserve's Consumer Advisory Council wrote a letter to Senator Dodd, urging him not to place the CFPA at the Federal Reserve, or at any other regulatory agency. The letter states "we think it would be imprudent to give the Federal Reserve or any other existing agency primary consumer protection responsibilities. No agency, including the Federal Reserve, has a strong record in this regard. In 1994 Congress gave the Federal Reserve the power to outlaw unfair and deceptive practices in the mortgage market. The Federal Reserve waited until 2008 to issue their rule, long after the problem had become a crisis and after the market had collapsed. During that time, we and other consumer protection experts issued reams of comment and testimony calling on them to exercise their authority to protect consumers." The full letter follows below.
The National Community Reinvestment Coalition is an association of more than 600 community-based organizations that promote access to basic banking services, including credit and savings, to create and sustain affordable housing, job development and vibrant communities for America's working families.
Friday, March 12, 2010
Chairman Christopher Dodd
448 Russell Building
Washington, DC 20510
Dear Chairman Dodd,
We the undersigned current and former members of the Federal Reserve's Consumer Advisory Council (CAC) are writing to express our support for a strong and independent Consumer Financial Protection Agency (CFPA), not housed within any other existing agency. Even an agency such as the Federal Reserve, which already has a Division of Consumer and Community Affairs, which includes the CAC and direct input from consumer, advocates, has competing priorities that undermine its ability to strongly enforce consumer protections.
Our service advising the Federal Reserve on consumer protection issues spans two decades. Those of us who are currently serving on the CAC are raising these concerns in that forum. Many of us have met with Federal Reserve Chairman Alan Greenspan and Chairman Ben Bernanke over the years to express our concerns about how consumers have been treated by financial institutions. Collectively, we raised concerns about unfair and deceptive mortgage lending, overdraft fees, credit card abuses and a host of other consumer lending abuses. We proposed ideas for consumer protections that we felt were necessary given what was happening in the capital and credit markets. The foreclosure crisis and the credit crunch bore out our concerns, but we take little comfort in being right.
However, given the validity of our concerns, we think it would be imprudent to give the Federal Reserve or any other existing agency primary consumer protection responsibilities. No agency, including the Federal Reserve, has a strong record in this regard. In 1994 Congress gave the Federal Reserve the power to outlaw unfair and deceptive practices in the mortgage market. The Federal Reserve waited until 2008 to issue their rule, long after the problem had become a crisis and after the market had collapsed. During that time, we and other consumer protection experts issued reams of comment and testimony calling on them to exercise their authority to protect consumers.
The Federal Reserve has its hands full with responsibilities relating to safety and soundness and monetary policy. Consumers will be served only by having the CFPA as an independent agency where the primary responsibility is consumer protection. We urge you reconsider your proposal for the CFPA to be within any other agency.
Sincerely,
John Taylor
President & CEO
National Community Reinvestment Coalition
Washington, DC
Stella Adams
Principal
SJ Adams Consulting
Durham, North Carolina
Malcolm M. Bush
Research Fellow
Chapin Hall, the University of Chicago.
Chicago, Illinois
Constance K. Chamberlin
President & CEO
HOME of Richmond
Richmond, VA
Kathleen Engel
Professor of Law
Suffolk University
Boston, MA
Thomas P. FitzGibbon, Jr.
Principal
BSI
Glenview, Illinois
Dwight Golann
Professor of Law, Former Chair of the CAC
Suffolk University
Boston, MA
Ken Harney
Syndicated Columnist
Washington Post Writers Group
Kirsten E. Keefe
Staff Attorney
Empire Justice Center
Albany, NY
Sarah Ludwig
Co-Director
Neighborhood Economic Development Advocacy Project (NEDAP)
New York, New York
Ruhi Maker
Senior Staff Attorney
Empire Justice Center
Albany, NY
Patricia McCoy
Director, Insurance Law Center and Connecticut Mutual Professor of Law
University of Connecticut School of Law
Hartford, Connecticut
Ronald L. Phillips, President
Coastal Enterprises, Inc.
Wiscasset, Maine
Dory Rand
Executive Director
Woodstock Institute
Chicago, Illinois
Hubert Van Tol
Director of Economic Justice
Pathstone
Rochester, NY
Alan White
Assistant Professor
Valparaiso University Law School
Valparaiso, Indiana
Marva E. Williams
Chicago, Illinois
Ted Wysocki
President & CEO
LEED Council
Chicago, IL
Robert Zdenek
Consultant
Common Bond
Westfield, New Jersey
Affiliations listed are for identification purposes only.
Contact: Jesse Van Tol (202) 464-2709
SOURCE National Community Reinvestment Coalition
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