Consumer Financial Protection Agency Faces Fight

Consumer Financial Protection Agency Faces Fight - 6/23/2009

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Consumer Financial Protection Agency Faces Fight
Jacqueline Bell

Securities Law 360. June 23, 2009
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EXCERPT: Since the Obama administration released its 88-page financial regulatory overhaul blueprint last week, a plan to create a new agency focused solely on protecting consumers of financial products has become a magnet for controversy. With banking industry groups already publicly challenging the idea as Congress prepares to tackle the White House's regulatory reform proposal, questions are also being raised about what the true impact of a new agency focused only on consumer protection could be, and how it could alter the structure of U.S. financial regulation in a number of ways. “It just totally revises the landscape. It changes the entire landscape, not just the rule book,” said Jack Murphy, a partner at Cleary Gottlieb Steen & Hamilton LLP. “What it does for the first time is pull the supervision, examination and enforcement of consumer protection requirements for banks out of the hands of banking regulators.” The blueprint proposes that a new regulator, the Consumer Financial Protection Agency, take over the job of protecting financial consumers, crafting new rules for products including home mortgages and credit cards. The CFPA as envisioned by the administration would be an independent agency with rulemaking and enforcement authority. As part of its mission, it would craft regulations requiring financial institutions to offer simple, easy to understand, “plain vanilla” financial products as a prominent option. The new agency would also require more disclosures and clear communications with banking product consumers. The CFPA would kick open the door to state regulators, allowing them to become stronger watchdogs of consumer financial products, including those offered by federally chartered institutions. The rules set by the CFPA would serve as a floor for state regulators, giving states the power to adopt stricter laws as they see fit. That aspect of the proposal could dramatically change the regulatory playing field for many banks, experts say.

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