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Jewish World Review Aug 14, 2012 / 26 Menachem-Av, 5772 Consumer finance watchdog: a birthday, but no one comes By Josephine Massey
JewishWorldReview.com | (TCSM)
The first anniversary of American consumers' new financial watchdog came and went without fireworks. The Consumer Financial Protection Bureau (CFPB) didn't trumpet its accomplishments. Its opponents didn't blast it for regulatory overreach. For an agency that (depending on your point of view) was either going to save consumers or bind and gag them with red tape, the silence was a little surreal.
"They've gotten off to a good start," says Claes Bell, a journalist for Bankrate, a Florida-based firm that tracks interest rates on mortgages, auto loans, and credit cards, among others. "They've created a user-friendly website and a streamlined complaint process." But "if you look at a list of things they've done to financial industries, they haven't done that much."
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They "don't look or sound like any other federal agency that you've ever heard of," says Travis Plunkett, legislative director at the Consumer Federation of America in Washington. "They're living up to their promises."
Banking officials are leery, however.
"The bureau's made a lot of people ooh and ahh, but we're still trying to figure out what that means for long-term development," says Richard Riese, senior vice president of the American Bankers Association's Center for Regulatory Compliance. For one thing, the agency went after the bank rather than the third-party vendors, whose customer-service employees were responsible for the violations. For another, the agency's expected ruling on mortgages is adding to banks' hesitancy to make loans.
Sometime after November's election, the CFPB is due to rule on what constitutes a qualified mortgage. If the rules are too loose, lenders could once again offer interest-only and other questionable mortgages that homeowners have no chance of paying off. If the rules are too tight, banks could restrict mortgage lending even more, choking off a housing recovery. A big question: If banks follow the lending rules, are they safe from consumer lawsuits?
If not, "that will substantially impede growth of the mortgage and housing market, make it difficult for large numbers of Americans to get loans, and will be a violation of a policy we've had for many years that says we will make mortgage loans available to everyone who has good credit," says Peter Wallison, codirector of American Enterprise Institute's program on financial policy studies and former general counsel at the US Treasury Department during the Reagan administration. "What we are seeing up to this time is not encouraging."
For example, by not defining what it means by "abusive" credit practices, the CFPB is putting businesses at constant risk of lawsuits, not only from the federal government but state authorities as well, he says. Also, if the agency continues to hand out stiff penalties for wrongdoing, then financial institutions may avoid lending to high-risk borrowers for fear that the CFPB might issue fines for the fees attached to the loan.
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