(continued from page 7)
Effect of CFPA on Consumer Credit and the Economy
cause us great concern.” These concerns
include the dilution of the uniform
national laws standard that preempts
state laws pursuant to the National
Bank Act, the breadth of powers of the
proposed CFPA, and the separation of
examination and supervision from consumer protection regulation.
ABA’s comment letter also restates
the banking industry’s concern about
the “breadth of authority granted to the
Director of the [CFPA] to exercise unilateral regulatory power to dictate a vast
array of conditions under which a financial product or service can be offered.”
In addition, the CFPA’s broad and
vague authority to “ensure fair dealing
with consumers” could “declare any
practice abusive and could essentially
justify almost any regulatory action.”
The bill would also fundamentally
change the Unfair or Deceptive Acts
and Practices (UDAP) standard
embodied in the Federal Trade
Commission Act. “ABA cannot support legislation that does not protect
developed legal standards on UDAP,”
asserts the letter.
ABA also raised alarm bells over
the separation of consumer regulation
from safety and soundness regulation.
Both types of regulation work well
together and separating them will produce negative consequences. For
example, states the letter, “a product
or practice which appears on its face
to benefit consumers can in reality be
harmful when safety and soundness
concerns are also considered.”
Another consequence of separation
is reduction in information sharing
among the agencies that oversee financial institutions. The discussion draft
does require consultation and coordination between the CFPA and the prudential regulators, but, the letter suggests, “a better and more workable
approach would be to bolster consumer
protection and oversight while ensuring
that the existing regulatory agencies
T
A study funded by ABA examined the likely effect of the CFPA Act on
access to and cost of credit to American consumers and businesses. The
authors are David S. Evans (University of Chicago Law School, Jevons
Institute for Competition Law and Economics) and Joshua D. Wright (George
Mason University Law School and Economics Department).
Based on their research, the authors reached three key findings: that the
CFPA Act would:
; Make it harder and more expensive for consumers to borrow and would
likely reverse the decades-long trend toward the democratization of credit;
; Create a “supernanny” agency that would ultimately substitute bureaucratic
decisions for consumer choice among financial products and services; and
; Jeopardize the economic recovery by dampening credit availability and
thereby depressing consumer spending and business activity.
Under what they called “plausible yet conservative assumptions,” Evans
and Wright estimate that the CFPA would ( 1) increase interest rates that consumers pay by at least 160 basis points; ( 2) reduce consumer borrowing by at
least 2. 1 percent; and ( 3) decrease the net new jobs created in the economy by
4. 3 percent. ;
retain both safety and soundness and
consumer protection responsibilities.” ;
Related articles in ABA Trust Letter
“Consumer Financial Protection
Agency Takes Draft Bill Form; SEC
Investor Protections Also Proposed,”
August 2009, page 1.
“Treasury Rolls Out Regulatory
Reform Plan,” July 2009, page 1.
GAO Analyzes Retirement Savings Conundrums
he Government Accountability
Office (GAO) recently issued two
reports on problems that degrade the
health and viability of retirement savings plans in the United States. Both
reports contain recommendations for
congressional action.
Plugging Leakage in Retirement Savings
The GAO looked at the incidence
and amount of the principal forms of
leakage from 401(k) plans prior to
retirement that can result in a permanent loss of retirement savings: ( 1)
