THE CONSUMER FINANCIAL PROTECTION AGENCY (CFPA) PROPOSAL INCLUDES RESPA AND TILA REGULATORY GOVERNANCE

U.S. Rep. Barney Frank officially introduced legislation to create the Consumer Financial Protection Agency (CFPA). The legislation, which is backed by the Obama Administration, would consolidate the consumer protection powers of the fifty various federal financial regulatory agencies by creating a single regulatory agency. The creation of this single regulatory agency is the single most important aspect of the proposed 229 page Consumer Financial Protection Agency proposal.

The current financial governing system encourages abuses in the industry to take place because of the loopholes created by an inefficient and ineffective regulatory structure. The loopholes are exploited even further by the mass infighting that many of the governmental regulatory bureaucracies regularly display. The consolidation of these various federal agencies into one rule-making and investigative federal division should provide more uniform rules for those in the real estate industry and for consumers of real estate products.

The CFPA will have sole authority to draft and interpret regulations under the existing consumer financial services and fair lending statutes. The recent Good Faith Estimate/HUD-1 Settlement Statement forms developed by HUD and the Truth In Lending Act form is a prime example of decisions being made by one federal agency without input from a completely different agency. The biggest benefit consolidation presents to the industry and to the consumer is that this will increase the number of enforcement investigators. The consolidation of regulatory investigators is crucial because quite often investigators in one agency stop investigating abuses that relate to other agencies due to a myriad of reasons.

The Consumer Financial Protection Agency would allow supervisory authority over the following:
1. The Truth in Lending Act (TILA)
2. Home Ownership and Equity Protection Act (HOEPA)
3. Real Estate Settlement Procedures Act (RESPA)
4. Community Reinvestment Act (CRA)
5. Equal Credit Opportunity Act (ECOA)
6. Home Mortgage Disclosure Act (HMDA)
7. Fair Debt Collection Practices Act (FDCPA)
8. Consumer Leasing Act (CLA)
9. Electronic Funds Transfer Act (EFTA)
10. Fair Credit Billing Act (FCBA)
11. Fair and Accurate Credit Transactions Act (FACTA)
12. Gramm-Leach-Bliley Act
13. Omnibus Appropriations Act as amended by the Credit Card Accountability Act
14. Secure and Fair Enforcement for Mortgage Licensing Act (SAFE)
15. Truth in Savings Act (TISA)
16. Alternative Mortgage Transaction Parity Act (aka Garn-St. Germain Depository Institutions Act of 1982)
17. Federal Deposit Insurance Act Sec. 43(c)(d)(e)(f)

It remains to be seen whether the Interstate Land Sale Act or the Manufactured Housing Loan Modernization Loan Act or other acts will be incorporated into the CFPA. Looking at the CFPA from a enforcement point of view only, the Consumer Financial Protection Act makes all the sense in the world because it certainly will add investigators to help curb abuses in the industry. However, there is concern about how far the regulatory powers of this new proposed agency will go. One problem in the past is that some agencies pushed for new regulations or provided guidance on rules that caused mass confusion in the industry and ultimately inflicted higher fees on consumers. This proposal should be vetted very carefully but the enforcement sections should be and need to be adopted immediately.