Watering Down the Consumer Financial Protection Agency Before It Even Opens For Business
All consumers, not just those who bank at the largest banks, deserve protection from irresponsible practices of banks. Yesterday, the House Financial Services Committee took a giant step away from that critical goal when it passed an amendment excluding over 97% of banks from the statutory reporting requirements to be performed by the soon-to-be-created Consumer Financial Protection Agency (“CFPA”).
The excluded banks are small banks and most credit unions. Small banks are classified as those with assets less than $10 billion or credit unions with assets less than $1.5 billion. To be sure, there are some valid arguments for imposing additional regulation on only the larger banks and financial institutions. Notably, they control about 80% of the assets.
But every financial institution must take some portion of the blame for the runaway greed, exotic financial instruments, and poor practices rampant in the financial sector over the past decade. Congress must not allow high-priced lobbyists to cabin this issue on the doorsteps of a few money centered banks. While the near collapse of the financial world’s banking industry may have been the result of the extreme conduct of a few large banks, excusing smaller banks and labeling their investment practices “less risky”, runs a foul of Congress’ duty to protect all consumers.
The Miller-Moore amendment and those who support it cite small banks’ inabilities to cope with costs related to annual examinations as reason for exemption. Isn’t this the same argument that big banks have been making for decades? The banking industry has always claimed that oversight will hurt business and decrease profits. Look where that argument got us!
Forgoing examination of 97% of our banks is not the answer, but rather the seeds of a new problem. Instead of giving these smaller institutions a free pass, the new regulator should tailor exams to each specific type of bank. For example, Citigroup and Bank of America should be subject to a very rigorous exam. Local community banks or credit unions should not get a pass, but simply be subject to a less onerous testing. Has Congress forgotten that all banks need tougher regulations in order for all consumers to be protected?
Assisted by: Zach Kady
Steven N. Berk has over twenty years of litigation experience spanning both the private and public sectors. His practice ranges from representing Fortune 500 Companies, to consumers. Steven is based in Washington, D.C. and founded Berk Law in May 2009....
