CFA Lobbies for Funding That May Not Be Available
Everyone is fighting for their own.
Progress in the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act’s “key customer and investor protections” are threatened by efforts of industry groups to weaken the rules and stop the funding of the agencies responsible for making those reforms a reality—at least in the view of the Consumer Federation of America.
According to a CFA progress report, both the fate of the Dodd-Frank Wall Street Reform and Consumer Protection Act hangs in the balance due to controversy coming from large financial interests and their allies in Congress whose actions “endanger the long-term success of these reforms.”
CFA sees possible funding cuts for the Securities and Exchange Commission and Commodity Futures Trading Commission, the agencies responsible for carrying out investor protection reforms as a threat.
The agency’s legislative director Travis Plunkett warned that opponents could stall key investor and consumer reforms that “generally are on track.”
Dodd-Frank framework of protections include an agency designed to protect financial consumers, stronger protections for retail investors, credit rating agency reforms and initiatives that enhance transparency, and regulatory oversight within the over-the-counter derivatives markets.
The risk, says Consumer Federation of America director of investor protection Barbara Roper, is in seeing more erosion in the faith of American consumers and investors in the integrity and stability of financial markets and the regulators’ ability to protect their interests, which ultimately slows down the country’s economic recovery.
Dodd-Frank created the Consumer Financial Protection Bureau which became operational in July to help prevent the proliferation of unfair and unsustainable lending practices, particularly in the mortgage and credit card markets.
During its first six months the CFPB hired about 400 staff members from diverse backgrounds, developed and implemented an organizational structure, created a consumer-friendly website, initiated a complaint response system to help consumers with credit card problems, and finalized protocols to supervise large banks regarding their compliance with federal consumer laws.
It is now developing supervision procedures for nonbanks, including mortgage, payday and student lenders.
The Consumer Financial Protection Bureau’s stated priority is to require companies to provide better information to consumers so that they can understand the true costs and financial risks of the credit products they purchase.
It is developing new mortgage loan disclosure forms and plans to do the same soon with credit card contracts and plans to address abusive financial practices, including wrongful mortgage foreclosures and abusive mortgage servicing practices.
Nonetheless, the Consumer Financial Protection Bureau remains a work in progress since it needs more federal funding while some in congress suggest its budget for fiscal year 2012 must be reduced by almost 50% to $200 million.
According to CFA a pending vote in the House of Representatives (H.R. 1315) would increase the power of other financial regulators to block CFPB consumer protection measures, implement bank-friendly regulations and also alter the bureau’s leadership structure from a single director to a five-member commission.
Another concern is addressing investor protections as the debate over the efficiency of the Dodd-Frank measures to regulate the nation’s securities markets through improved tools to enforce the securities laws continues—including the creation of a potentially powerful new Office of Investor Advocate within the SEC.
The SEC must get approval from House and Senate appropriators for its funding reprogramming plan before it can move forward with establishing this office and hiring a director. It has submitted a plan and is awaiting that approval.