NAACP Supports the Creation of a New Consumer Mortgage and Financial Services Protection Agency
THE NEW AGENCY WOULD ADDRESS THE FLAWS IN THE CURRENT REGULATORY SYSTEM OVERSEEING AND HELPING TO ENFORCE CONSUMER PROTECTION LAWS
President Obama has proposed establishing a new Consumer Financial Protection Agency (CFPA), which would be charged with overseeing consumer protection in the home mortgages and financial services areas. Specifically, the President is proposing that we take all of the agencies that are currently meant to monitor and protect consumers’ interests when it comes to financial products and put them under one agency, thereby consolidating authority in one place with a new emphasis on protecting mortgage loans and financial services for consumers.
Our current system of consumer protection fails to protect American families from the most basic abuses that can cost households hundreds of thousands of dollars, and even their homes. Current laws and enforcement allow a range of institutions to escape supervision because responsibility for consumer protection is fragmented across too many regulators and many finance companies are not regulated at all at the Federal level. Regulators have spent recent years asking “What’s the effect on the financial firm?” without asking “What’s the effect on consumers?” As a result, among other problems, regulators permitted inappropriate mortgages and abusive credit card practices. Sadly, many of the worst abusers targeted low-income families and racial and ethnic minorities.
In the recent crisis, many of the people who were targeted by unscrupulous lenders lost their savings, their financial security, and in too many cases their homes. Furthermore, millions of American families saw their retirement savings or even their children’s college funds fall dramatically. Unregulated markets and over-reliance on the flawed judgments of credit rating agencies increased the instability of the financial system, which in turn exposed individual investors to tremendous risk. As proposed, the CFPA would focus on the core reforms that will address the causes of the current crisis, make the system more stable and resilient and give the government tools to better anticipate, avoid and address a potential future crisis.
The NAACP strongly supports this much needed consumer protection proposal and would in fact strengthen it by making civil rights an important component of the new agency’s stated mission and create a Civil Rights/Fair Lending Compliance and Enforcement Office. This office should serve a dual function – first to insure that the CFPA itself operates in a manner that affirmatively furthers fair housing and second to insure that financial market players comply with fair lending statutes. The CFPA must have the appropriate power and resources to vigorously enforce the fair lending laws under its auspices - Equal Credit Opportunity Act (ECOA), Home Mortgage Disclosure Act, Community Reinvestment Act, and other appropriate fair lending statutes. It must have sufficient authority and resources to conduct fair lending examinations, engage in compliance activities, and write rules. This office must be headed by a senior level administrator who reports directly to the Director of the CFPA.