PANEL II OF A HEARING OF THE SENATE BANKING COMMITTEE SUBJECT: CREATING A CONSUMER FINANCIAL PROTECTION AGENCY: A CORNERSTONE OF AMERICA'S NEW ECONOMIC FOUNDATION CHAIRED BY: SENATOR CHRISTOPHER DODD (D-CT) WITNESSES: RICHARD BLUMENTHAL, ATTORNEY GENERAL, STATE OF CONNECTICUT; EDWARD YINGLING, PRESIDENT & CEO, AMERICAN BANKERS ASSOCIATION; TRAVIS PLUNKETT, LEGISLATIVE DIRECTOR, CONSUMER FEDERATION... (Part 3).
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Article Excerpt
PANEL II OF A HEARING OF THE SENATE BANKING COMMITTEE SUBJECT: CREATING A CONSUMER FINANCIAL PROTECTION AGENCY: A CORNERSTONE OF AMERICA'S NEW ECONOMIC FOUNDATION CHAIRED BY: SENATOR CHRISTOPHER DODD (D-CT) WITNESSES: RICHARD BLUMENTHAL, ATTORNEY GENERAL, STATE OF CONNECTICUT; EDWARD YINGLING, PRESIDENT & CEO, AMERICAN BANKERS ASSOCIATION; TRAVIS PLUNKETT, LEGISLATIVE DIRECTOR, CONSUMER FEDERATION OF AMERICA; PETER WALLISON, ARTHUR F. BURNS FELLOW IN FINANCIAL POLICY STUDIES, AMERICAN ENTERPRISE INSTITUTE; SENDHIL MULLAINATHAN, PROFESSOR OF ECONOMICS, HARVARD UNIVERSITY LOCATION: 538 DIRKSEN SENATE OFFICE BUILDING, WASHINGTON, D.C. TIME: 9:00 A.M. EDT DATE: TUESDAY, JULY 14, 2009(Part 3)
As a result, under the proposed legislation, every provider of a financial service -- and that term incidentally includes everything from banks to check cashing services and from furniture rental companies to Western Union -- every one of these institutions, not including incidentally securities firms or insurance companies, which are also involved in financial activity, is required to offer a plain vanilla product or service, to be defined and approved by the CFDA that will be simpler and entail "lower risks" for consumers.
This raises to me the obvious question, once the CFDA has prescribed a simpler and lower risk mortgage, who will be eligible to buy the more complex product that is tailored to a consumers particular needs? In effect, this question places on the provider, the burden of deciding which of his customers is qualified for the more complex or riskier product. Going beyond the plain vanilla product will entail risks for the provider, who could face and enforcement proceeding and a fine from the CFDA, action by a state attorney general or a state consumer protection agency -- also to enforce the CFDA's...
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