Regulatory Costs to Fall Under CFPA, Treasury Says

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

The proposed Consumer Financial Protection Agency (CFPA) will lead to a reduction in regulatory costs by eliminating areas where current authorities overlap or conflict, Treasury Assistant Secretary for Financial Institutions Michael Barr told Congress July 14.

At a hearing of the Senate Banking Committee, Barr argued that due to the breadth and diversity of authorities proposed for the CFPA it will be able to tailor its solution to the underlying problem with the least cost to consumers and institutions.

Barr also addressed a host of concerns about the proposed new agency, a central pillar of the administration’s financial overhaul plan, stating that it will preserve rather than stifle innovation, ensure consumer choice in the financial marketplace, and increase national regulatory uniformity.

Critics of the CFPA, including ranking committee member Sen. Richard Shelby, R-Ala., said it would be “irresponsible” if consumers were led to believe that the CFPA would shield them from risk, noting that risk cannot be eliminated from the system. “I’m greatly concerned over many aspects of the president’s plan, not to mention its underlying premise,” Shelby said.

Meanwhile, Sen. Charles Schumer, D-N.Y., said failure to create the CFPA would leave a “gaping hole” in plans to overhaul financial regulation, citing a “sorry history” of regulating financial consumer products in the past. Barr also pointed to a “massive failure” of the regulatory system until now, due to a system of banking agencies having mixed missions.