The administration releases its financial reform plan in just a few minutes (download it here.) There are a lot of moving parts, and the devil will, of course, be in the details that no one has yet. But it’s a good start on one crucial piece for consumers: the creation of a new consumer protection board dedicated to keeping financial products safe, as we advocated yesterday with the launch of Americans for Financial Reform.
From our colleagues at Consumers Union, some features of a new oversight board for mortgages, credit cards, bank accounts and other financial products (they call it the CFPA):
• The CFPA’s job will be to ensure that credit, deposit and payment products and services and related products and services, are being offered in a fair, sustainable and transparent manner. The job will include quick response to emerging harmful practices, before they spread throughout the country or become large enough to undermine family economic stability or threaten the economy.
• The CFPA can address all forms of credit, deposit, and payment products and services offered to consumers or to small businesses. It can also address related products and services such as prepaid debit cards, loan servicing, debt collection, debt-related services.
• Giving the CFPA the power to issue rules to set standards to address rapid evolution and changes in the marketplace will protect honest competition, consumers, and the economy. This will also protect consumers when the technology and design of new financial products outstrips the existing consumer protection laws.
• The CFPA can bring into one federal agency the job of writing consumer protection rules under a large number of existing federal statutes, and the job of writing rules for harmful or deceptive practices that should be outlawed or restrained.
• The CFPA should have the power to determine that products, features, or practices are unfair, deceptive, abusive or unsustainable. Its powers should include banning, restricting, or imposing conditions on practices, products or features, creating product standards, and requiring special monitoring, reporting and impact review of certain products, features or practices.
• Importantly, this new federal agency won’t stop states from protecting their residents, or consumers from protecting themselves. Individuals, State Attorneys General, existing state and federal financial regulators, and the new agency must each have the ability to enforce consumer protection rules and laws administered. State law will not be pre-empted or displaced. States could also develop and apply new consumer protection rules.
One major factor in the economic collapse was the failure of federal regulators to rein in risky and predatory mortgage lending. A new financial product oversight board must be dedicated to catching just this kind of abuse, enact rules to prevent new abusive practices, have the teeth to punish companies that break the law, and give consumers the ability to intervene to protect themselves if regulators fail.
More on this, and some of the problems in the administration's plan, at the Multinational Monitor blog.