FDIC Head Still Backs CFPA

Despite strong opposition from the banking industry, Federal Deposit Insurance Corp. chairman Sheila Bair continues to support the creation of a Consumer Finance Protection Agency that has rule making authority over banks and non-bank lenders. She told the Financial Crisis Inquiry Commission that banking regulators failed to rein in risky underwriting practices because business was so profitable. Many of the current problems facing the financial system "were caused by a lack of strong, comprehensive rules against abusive lending practices applying to both banks and non-banks, and lack of a meaningful examination and enforcement presence in the non-bank sector," she testified. The CFPA should have sole rule-making authority for consumer protection statutes along with supervisory and enforcement authority over non-banks involved in consumer finance, Ms. Bair said. Federal banking regulators would retain their enforcement authority over federally insured depositories. This approach would eliminate regulatory gaps between banks and non-banks, Ms. Bair said, and eliminate the "potential for regulatory arbitrage" caused by federal preemption of state consumer protection laws.