Opponents of CFPA attempt to mislead the public

I don't often go to my own blog.  Seems weird at first, but I usually go straight to the "behind the scenes" view of my blog where I can post and respond to comments from readers.  Its not often that I go to my main page that you see when you go to my blog.  I do it occasionally though, primarily to make sure everything is still looking right and to see what ads are showing up on my blog.  I don't get to pick the ads I want displayed.  Google does this for (or to) me.  But I can block ads that I don't want on my blog.  Of course, they first have to appear on my blog before I can block them.  I have mostly blocked sites that offer "free" credit reports that are not really free or other scam or anti-consumer type ads.

Today, I blocked an ad for http://www.stopthecfpa.com/.  I checked this site out to find out that it ony provides made up horror stories and misleading information about the Consumer Financial Protection Act. 

Here are its "horror stories" about what would happen if the CFPA is passed -

“You guys are regulating us out of business. I am a small business owner–but my business may shut down due to the COST of complying with government regulations. Alex, my 1 full-time employee, and Kathy, Amanda, Sandy, Hannah, Caleb, & Stephanie, my 6 part-time employees, may lose their jobs.” — Ben
“I am a small business owner, and it seems like these days, government doesn’t like us.” — Tim Byers
“How the CFPA affect me? Simple: my cabinet shop business will cease to exist.” — Mona Steck
“While I agree that we need to strengthen consumer protection laws, I am concerned this bill will have significant unintended consequences that will harm consumers, rather than protect them. It is all ready difficult to run my business, which has twelve employees. With new restrictions that would further decrease the options for people to do business or pay for services; I can only see more of the same spiral that we are in. I know that my business might not seem like a big problem, but I am not alone. I am like the regular Joe American. I am like what makes up America.” — Greg Welch

Notice that none of these blurbs provide any basis for the people's so called fears.  The CFPA would not restrict consumers' options for paying for services.  It would have no effect on that at all.  Here's what the CFPA would really do -

To begin with, be aware that the agency's powers and oversight would extend far beyond mortgages and real estate -- into all credit cards, debit cards, consumer loans, payday loans, credit reporting agencies, debt collection, stored-value cards and even investment advisory and financial advisory services, to name only part of the list.


It would have the authority to alter long-common practices that nettle consumers, such as mandatory arbitration clauses in the fine print of contracts that automatically send business-consumer disputes to arbitrators rather than to courts. The agency could ban or limit such clauses in specific products if they are shown to tilt against consumers' interests.

The agency would write the user-safety rules for virtually all consumer financial products and would have the legal firepower to levy huge fines -- tens of thousands of dollars a day per violation in some cases -- and prosecute lenders, brokers and others who break the rules.

The agency would be the dominant federal consumer protector in all home real estate settlements. It would regulate "affiliated" title, escrow and financing businesses connected with realty firms and builders. It would oversee equal credit opportunity and fair housing, and would set standards for all mortgage offerings, whether from the biggest national banks or the smallest local brokers. Generally it wouldn't seek outright bans on mortgage products that carry elevated risks -- interest-only loans, for instance -- but would require that lenders restrict such mortgages to well-informed applicants who can document that they understand the risks and can afford the payments.

Within its first year, the agency would be tasked with creating consumer-friendly, uniform disclosures for all home purchase and financing transactions, starting with a combined "good-faith estimates" and truth-in-lending statement.

The core idea behind the proposal, supporters say, is to pull together consumer oversight powers that are now scattered among various agencies, and to put consumer interests where they should be -- much higher on the priority list than they were during the years leading up to the housing and credit bubble and bust.

Banking and mortgage trade group leaders generally agree that the existing regulatory system failed badly -- for consumers and the industry itself.

The CFPA, if passed, would be good for consumers and only bad for credit card companies and other large companies that broke the rules.  Its basically a lot like the FTC is now, only with the power to actually enforce the laws that the FTC does not have the manpower to enforce.  Small businesses would not be affected so long as they followed the rules which, if they are good businesses, they would already be doing since doing so is good business for their customers.

Obama almost gets it right

In June, President Obama released a plan to revamp the government's financial regulatory system. The primary feature of the plan is the creation of a new federal agency called the Consumer Financial Protection Agency ("CFPA") whose primary focus will be to enforce consumer protection laws.

Kudos to President Obama for recognizing the problem with the lack of enforcement of the consumer protection laws such as the FCRA. President Bush could have cared less the enforcement (or lack thereof) of the FCRA. So consumers are in much better hands now with President Obama in the White House.

But the key to increasing enforcement of the FCRA is not to switch enforcement agencies from the FTC to the CFPA. The key is to increase the penalties against violators of the FCRA, thereby making it more attractive for the nation's army of attorneys to sue the credit bureaus and furnishers who violate the FCRA. A large percentage of my practice as an attorney is comprised of representing consumers under the FCRA. It is so so so easy to find multiple violations of the FCRA in every case. The problem, though, is that it is very difficult to quantify the damage caused by these violations. IF the FCRA contained automatic damages of sufficient significance for violations of the FCRA, attorneys would flock to these cases and make the credit bureaus and furnishers toe the line or pay the fine.

One step closer to the creation of the CFPA

Breaking news:

"Addressing the Obama Administration's proposals to reform financial regulation in the US, Barney Frank (D-MA), Chairman of the House Financial Services Committee, has promised to report legislation which would create a new Consumer Financial Protection Agency (CFPA) before the House adjourns for its August recess at the end of July."

If this legislation is passed, the CFPA will be in charge of enforcement of the consumer protection statutes including the FCRA. Of course, you will still be able to file lawsuits for violations of any of the statutes containing private causes of action. But maybe with the CFPA you can get somewhere on the non-private causes of action since the FTC can't and/or won't do anything about it.