As part of its financial regulatory reform proposal the Obama Administration has called for the creation of a Consumer Financial Protection Agency (CFPA) that would consolidate enforcement of most consumer financial services requirements under one roof (U.S. Department of the Treasury 2009). A truly independent agency, with appropriate staff and financial resources, is critical to the realization of the goal of fair access to credit and to assure the safety and soundness of the nation’s financial service providers. The industry opposes the creation of this agency. According to Barney Frank (D-Mass.), Chair of the House Financial Services Committee, the industry’s “highest priority is killing the agency” (Dennis 2009). But the success of efforts to restore stability to the nation’s financial markets and continue what has been progress toward the goal of fair access to financial services may depend on the fate of this agency.
What the Consumer Financial Protection Agency Would Do
The CFPA would be “dedicated to protecting consumers in the financial products and services markets” (U.S. Treasury 2009: 55). It would have authority to write regulations, supervise compliance, and enforce the law when violations occur. According to the initial Administration proposal, among the statutes that would be covered are the Truth in Lending Act (TILA), Home Ownership and Equity Protection Act (HOEPA), Real Estate Settlement and Procedures Act (RESPA), Community Reinvestment Act (CRA), Equal Credit Opportunity Act (ECOA), Home Mortgage Disclosure Act (HMDA), and Fair Debt Collection Act (FDCPA). The agency would also have jurisdiction over non depository institutions (e.g. independent mortgage bankers, brokers) that are not currently supervised by any federal authority. These are the lenders that were primarily responsible for the problematic subprime and predatory lending of recent years (Immergluck 2009, Kroszner 2008).
One objective of the agency would be to create clearer, simpler products and disclosure forms to better educate consumers and bring far more transparency to financial services markets. As part of that effort the CFPA would establish minimum standards for all lenders to follow but it would not pre-empt those states or local communities that chose to take stronger actions or respond to localized problems.