Congress will soon consider H.R. 3126, the Consumer Financial Protection Agency (CFPA) Act, legislation to create a new, massive government agency to regulate consumer financial products. Although some improvements have been made to the bill since its introduction, unfortunately they do not go far enough.
NEMA supports stronger consumer protection. Clearly, regulatory gaps have contributed to economic harm and failed to adequately protect consumers. Reform solutions that better protect consumers in the future are necessary. The objectives of such reform should be to regulate previously unregulated entities, weed out predatory products, and improve disclosures so they are clear, concise, and apprise consumers in understandable terms about the risks posed by financial products. NEMA believes this can be done while striking a balance with ensuring consumer choice, credit, and product availability and affordability.
Unfortunately, H.R. 3126 does not achieve those goals but would instead replace personal and business choice by giving the CFPA sweeping and broad authority to regulate businesses across the spectrum of industry, even if they are not in the business of consumer finance. Broad definitions and vague regulatory standards would give the CFPA unending jurisdiction, exposing businesses both to its regulatory authority and the litigation exposure that comes with it. The uncertainty in regulatory standards and increased liability create significant disincentives for institutions to lend to consumers, further restricting access to credit and increasing the price of credit products for consumers.
Traditional financial products providers are not the only entities that will be impacted by CFPA's proposed regulatory authority. As proposed, the bill could impact virtually any business that accepts credit cards or that has at best a weak connection to consumers or consumer financial transactions. H.R. 3126 gives the CFPA unprecedented authority over millions of businesses across diverse industries that have little to do with consumer finance and had nothing to do with the financial crisis.
Efforts to enhance consumer protection should focus on weeding out fraudulent actors and predatory products and ensuring consumers have access to clear and concise information about the terms and conditions of products. This bill, however, arguably weakens consumer protection by allowing the government to dictate the financial products consumers and businesses can choose, adding new layers of bureaucracy, imposing new costs, and threatening the privacy of financial information. As our economy transitions out of the recession, enacting H.R. 3126 would be disastrous for recovery efforts.
Please use the form below to urge your legislators to oppose H.R. 3126, the Consumer Financial Protection Agency (CFPA) Act, unless it is modified to address these issues. For more information on the bill, please visit www.StoptheCFPA.com.
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