Olga wrote me last week, bringing my attention to a discussion of whether the U.S. is re-regulating itself out of competition for global business and capital. I kept her note in my inbox, and over the course of the week a number of other articles and blawgers caught my attention on the same topic; Richard Posner among them. My motivation for discussing re-regulation here is not so much the broader perspective of – are the regulators in the best position to tell consumers and businesses how and what they should be doing, and where will that structure lead us in ten years – as much as it is what this re-regulation practically entails to those businesses and consumers immediately subject to it. And I think plenty of folks will be subject to it: in total, as of last week, there are 32 government czars. That’s a lot of administrative law (as a side note for another post: is there an issue of executive vs. legislative power here?).
The Obama Administration has proposed the Consumer Financial Protection Agency (“CFPA”) Act of 2009 (the “Act”), intending a number of things. First, it seeks to bring under federal supervision non-regulated financial bodies that act as banks. This includes mortgage brokers and consumer-credit companies. Second, it will “consolidate[e] responsibility for consumer protection under one agency.” Third, FCPA “market-wide jurisdiction” will focus solely on how banking products and practices affect consumers. And Fourth, the FCPA will have “consolidated authority” to write, supervise, and enforce rules. For example, financial products and services that would come under this jurisdiction include but are not limited to: deposit-taking services, various forms of credit extension and loan servicing rights, as well as real property services (Ie., settlement services, title insurance services, and matters of leasing). The FCPA will have a board of five members serving terms of five years, including: the National Bank Supervisor and four additional members proposed by the President with consent of the Senate. The agency will also have a consumer advisory board (similar to the role of the Investor Advisory Board to the SEC).
The Act does have some teeth, however. Similar to the SEC’s ever-useful §10b and Rule 10b-5 violation of the Exchange Act, the FCPA would be empowered with a similar enforcement provision over similar-such fraud. This includes, among other things, fraud as regards public disclosures of consumer financial products and services, as well as sales practices. One of the most interesting provisions of the Act, however, is the CFPA responsibility to create “standard consumer product[s] or service[s].” Essentially, the CFPA will create bare-bone versions of financial products and service, and these bare-bone versions must be offered for sale alongside the other, privately-created financial products and services. Just a guess, but this “standard” product discussion is going to get pretty lively in the next several months.
Also, as part of the second intent of the FCPA - as described above, consolidating consumer protection – the Act proposes removing consumer-related functions and responsibilities from existing administrative agencies. As the Act stands now, this would affect: the Federal Reserve Board (“Fed”), the Office of the Comptroller of the Currency (“OCC”), the Office of Thrift Supervision (“OTS”), the Federal Deposit Insurance Corporation (“FDIC”), the Federal Trade Commission (“FTC”), and the National Credit Union Administration (“NCUA”). This has raised some eyebrows as the Act was introduced earlier this summer, and is also likely to create drama throughout the next several months.
The House has absorbed much of the Act in the form of bill H.R. 3126. However, the House bill does not contain reference to either the creation of a National Bank Supervisor, or removing consumer-related enforcement as delegated by the Community Reinvestment Act (“CRA”) (as regards depository institutions engaging in fair lending, overseen by the OCC, the Fed, the FDIC, and the OTS). Discussion of the bill is pending the Congressional summer adjournment (Washington reconvenes after Labor Day). Additionally, there are Senate and House bills for a Financial Product Safety Commission (S. 566 and H.R. 1705, respectively). Both bills are yet in Committee, so am unsure at the time of this post if their provisions will be absorbed by the FCPA, or forfeited altogether.
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The Obama Administration has proposed the Consumer Financial Protection Agency (“CFPA”) Act of 2009 (the “Act”), intending a number of things. First, it seeks to bring under federal supervision non-regulated financial bodies that act as banks. This includes mortgage brokers and consumer-credit companies. Second, it will “consolidate[e] responsibility for consumer protection under one agency.” Third, FCPA “market-wide jurisdiction” will focus solely on how banking products and practices affect consumers. And Fourth, the FCPA will have “consolidated authority” to write, supervise, and enforce rules. For example, financial products and services that would come under this jurisdiction include but are not limited to: deposit-taking services, various forms of credit extension and loan servicing rights, as well as real property services (Ie., settlement services, title insurance services, and matters of leasing). The FCPA will have a board of five members serving terms of five years, including: the National Bank Supervisor and four additional members proposed by the President with consent of the Senate. The agency will also have a consumer advisory board (similar to the role of the Investor Advisory Board to the SEC).
The Act does have some teeth, however. Similar to the SEC’s ever-useful §10b and Rule 10b-5 violation of the Exchange Act, the FCPA would be empowered with a similar enforcement provision over similar-such fraud. This includes, among other things, fraud as regards public disclosures of consumer financial products and services, as well as sales practices. One of the most interesting provisions of the Act, however, is the CFPA responsibility to create “standard consumer product[s] or service[s].” Essentially, the CFPA will create bare-bone versions of financial products and service, and these bare-bone versions must be offered for sale alongside the other, privately-created financial products and services. Just a guess, but this “standard” product discussion is going to get pretty lively in the next several months.
Also, as part of the second intent of the FCPA - as described above, consolidating consumer protection – the Act proposes removing consumer-related functions and responsibilities from existing administrative agencies. As the Act stands now, this would affect: the Federal Reserve Board (“Fed”), the Office of the Comptroller of the Currency (“OCC”), the Office of Thrift Supervision (“OTS”), the Federal Deposit Insurance Corporation (“FDIC”), the Federal Trade Commission (“FTC”), and the National Credit Union Administration (“NCUA”). This has raised some eyebrows as the Act was introduced earlier this summer, and is also likely to create drama throughout the next several months.
The House has absorbed much of the Act in the form of bill H.R. 3126. However, the House bill does not contain reference to either the creation of a National Bank Supervisor, or removing consumer-related enforcement as delegated by the Community Reinvestment Act (“CRA”) (as regards depository institutions engaging in fair lending, overseen by the OCC, the Fed, the FDIC, and the OTS). Discussion of the bill is pending the Congressional summer adjournment (Washington reconvenes after Labor Day). Additionally, there are Senate and House bills for a Financial Product Safety Commission (S. 566 and H.R. 1705, respectively). Both bills are yet in Committee, so am unsure at the time of this post if their provisions will be absorbed by the FCPA, or forfeited altogether.
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