Bar-Gill confronts critics of the proposed Consumer Financial Protection Agency

In a November 18 op-ed in The Hill, Professor Oren Bar-Gill argues in support of the proposed new Consumer Financial Protection Agency (CFPA). The House Financial Services Committee passed the Consumer Financial Protection Agency Act of 2009 in October, but the bill still needs to be approved by the Senate. The CFPA would oversee consumer financial products (CFPs)—including mortgages, credit and debit cards, and more—but first needs to win over critics who question what powers such an agency would have, and how those powers would be exercised.

“While the critics are making some valid points,” Bar-Gill writes, “their most powerful arguments have nothing to do with the basic question: Do we need a CFPA? The (almost) uncontested answer to this question is: ‘Yes, we do.’”

One of the critics’ worries, Bar-Gill says, is that an agency created solely for this purpose may apply its power more capriciously than current regulators like the Federal Reserve or Federal Trade Commission do now. But, Bar-Gill suggests, the goal of a new agency is to consolidate the power to regulate CFPs, and ensure that regulations are applied judiciously and more thoroughly. Plus, there are multiple agencies regulating CFPs, each with varying levels of authority and motivation. The result, writes Bar-Gill: “Regulators with authority to police CFPs lack the motivation to do so and the regulator with motivation to protect consumers lacks authority over important CFP sellers.”

“To effectively challenge the need for a CFPA, critics must either contend that these problems are insignificant or offer alternative solutions,” writes Bar-Gill in conclusion. “For the most part, they have done neither.”

Posted November 23, 2009

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