Wednesday, September 9, 2009

CFPA: Hero or Menace?

By Andrew Lipsitz
The Consumer Financial Protection Agency (CFPA) is a 150 page proposal written by the Obama administration and was created to regulate basic consumer finance and put an end to this so called "culture of irresponsibility."
The agency would set up new standards for standard mortgages and mortgage loans, restrict to its best power any risky loans, investigate financial institutions and impose a few new laws that are aimed to protect credit card users. Basically, the agency would mandate that all financial institutions must offer plain “cookie-cutter” financial products to their clients, which would require these institutions to pay costly regulation fees. While some argue that this is the best approach to help reshape and sustain the economy, others believe that in a country with so many different situations and needs, a “one-size-fit-all” approach is foolish.
Many banks have responded extremely negatively towards the proposal for an agency, including industry leaders such as JP Morgan Chase and Wells Fargo. The opposition does not end there as thousands of small banks, mortgage lenders and independent mortgage brokers press their lobbyists to go to battle.
“Administration officials said the proposal would create a ‘level playing field’ and provide the same regulation for particular consumer products regardless of what kind of financial institution was selling them.” Industry leaders fear that this regulation would create a lack of competitiveness as well as innovation for financial products.

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