Dodd introduced the bill along with fellow committee members Jack Reed, Charles Schumer, Robert Menendez, Daniel Akaka, Jon Tester, Mark Warner, Jeff Merkley and Michael Bennet -- all Democrats, so at least it looks as though this may be a partisan effort, but the issue is so important I hope it can become a bipartisan bill.
In introducing the bill, the Senate Banking Committee members issued a statement saying they believe "American consumers already have protections against faulty appliances, contaminated food, and dangerous toys. With the creation of the Consumer Financial Protection Agency, they'll finally have a watchdog to oversee financial products, giving Americans confidence that there is a system in place that works for them – not just big banks on Wall Street."
They went on to say that, "The economic crisis was driven by an across-the-board failure to protect consumers. When consumer protections are handled by regulators whose primary responsibility is to safeguard the profitability of the companies they regulate, consumer protections don't get the attention they need. The result has been unfair, deceptive, and abusive practices being allowed to spread unchallenged, nearly bringing down the entire financial system."
Committee members also believe a new Consumer Protection Financial Agency is needed because the Federal Reserve, which was the primary consumer protection rule-writer, repeatedly failed to act in the consumers best interests and because the Federal Trade Commission, while responsible for consumer protections for non-bank finance companies, lacks the authority and capacity to examine these non-bank entities.
As proposed by the Senate Banking Committee he Consumer Financial Protection Agency will:
- Consolidate consumer protection responsibilities currently handled by the Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation, the Federal Reserve, the National Credit Union Administration, and the Federal Trade Commission.
- Be led by a five-member board with an independent director. The Chairman of the Financial Institutions Regulatory Administration will have a seat on the board.
- Unite rule-writing, supervision, and enforcement for consumer protection in a single, stand-alone agency with broad authority to investigate and react to abuses as they develop.
- Lookout for bad deals and schemes. Consumers won't have to wait for Congress to pass a law to be protected from bad business practices.
- Create a new Office of Financial Literacy.
- Level the playing field for insured banks by regulating the shadow banking industry, such as mortgage brokers and payday lenders, for the first time and ensures that companies offering customers the same products receive the same regulatory treatment.
- Make one agency accountable for consumer protections. In the past many agencies shared responsibility. It was hard to know who was responsible for what. Problems often fell through the cracks because no agency had direct responsibility.
- Allow states to pass tougher consumer protections that apply to all lenders, preventing federal regulations from preempting stronger state laws.
- Coordinate with other regulators when examining banks to prevent undue regulatory burden.
- Focus resources on companies that pose the biggest risk to consumers - mortgage bankers, brokers, finance companies and the largest institutions.
Lita Epstein has written more than 25 books including The Complete Idiot's Guide to Improving Your Credit Score.