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Democrats Destroy CFPA

Oct 18, 2009 | By: Mr_Blue | Tags: consumer protection, cfpa

The Obama Administration, as part of their comprehensive but weak financial regulatory reform plan, proposed a new federal agency called the Consumer Financial Protection Agency (CFPA). The proposal, probably the strongest one out of all the other proposals, addressed many of the weaknesses of consumer protection laws that were exploited during the lead-up to our financial crisis.

The weaknesses included the dispersal of consumer protection responsibilities over several regulatory bodies that have other responsibilities that far too often were a priority over consumer protection and allowing states to enforce their own sometimes stronger consumer protection laws. As originally proposed, CFPA would become the main consumer protection agency for financial services. The proposal would strip away the consumer protection function from many of the other financial services regulators and consolidate the function in the CFPA. The proposal also allowed states to exercise their ability to enforce their own consumer protection laws. It essentially set a “floor” or a foundation for consumer protection regulations that states can make stronger if they so choose.

But, the CFPA was too much for corporate Democrats and their financial industry benefactors. The Consumer Financial Protection Act (CFPA) has been gutted by Democrats. This past week the House Financial Services Committee, approved an amendment to exempt 98% nation’s banks from oversight by a new agency created to protect consumers from abusive or deceptive credit cards, mortgages and other loans. So, small banks and credit unions don’t commit fraud or implement deceptive lending practices. Is there a proof or evidence of a correlation between size of a financial institution and its likelihood to implement fraudulent practices. I didn’t know greed and recklessness was limited to financial conglomerates.

Oh, but it gets better. Now that the Democrats have gutted the CFPA they are trying to just kill it. New Democrats Caucus lead by Rep. Melissa Bean, Wall Street’s favorite Democrat, are considering an amendment that would preempt states from enforcing their own sometimes stronger consumer protection laws.

The CFPA, as originally proposed, attempted to establish a regulatory floor that allowed states to pass or enforce stricter consumer protections. The idea was to specifically address the situation that was transpiring in early 2000s when predatory lenders were running for cover and protection from some states’ stricter consumer protection laws. They turned to federal regulators who were eager to help out the predatory lenders and preempt states’ rights to protect their citizens.

The Bean Amendment would basically re-enforce the status quo. If this Bean Amendment passes what is the point of the CFPA? It would become a useless and toothless regulatory agency. Why bother at that point?

Cross Posted @ The Economic Populist