For the CFPA
October 28, 2009 | federal legislation, industry | Comments (0)The House Financial Services Committee last week agreed to make banks subject to state regulation, as long as those regulations do not “significantly interfere” with a bank’s ability to operate. That is a reasonable compromise between the unrestricted state control in the original bill and the lack of control the bankers wanted.
Other compromises were not so reasonable. There is something to be said for exempting community banks from oversight by the new agency, as they did not create the financial crisis. The problem is, the committee’s idea of a community bank is one with assets of less than $10 billion.
Also exempt from the agency’s control would be retailers, title insurance providers and auto dealers. Consumer advocates argued, to no avail, that while auto dealers do not actually make the loans themselves, they do make the sales pitches and therefore should be regulated.
Another casualty was the idea of requiring standardized “plain vanilla” mortgages that consumer could compare with more elaborate instruments and thus have a better idea of what they need.
States still would be allowed to enact consumer protection regulations tougher than those of the federal government, but federal regulators could override them on a case-by-case basis.
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