Consumer law professors in support of CFPA

The Honorable Christopher J. Dodd
Chairman
Committee on Banking, Housing and Urban Affairs
United States Senate

The Honorable Richard C. Shelby
Ranking Member
Committee on Banking, Housing, and Urban Affairs
United States Senate

The Honorable Barney Frank
Chairman
Financial Services Committee
United States House of Representatives

The Honorable Spencer Bachus
Ranking Member
Financial Services Committee
United States House of Representatives

Via Facsimile

Dear Senators Dodd and Shelby
and Representatives Frank and Bachus,

Statement in Support of Legislation Creating a Consumer Financial Protection Agency

As teachers and scholars in the fields related to consumer law and banking law who currently teach at American law schools in such states as Alabama, Arizona, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Ohio, Oregon, Nebraska, North Carolina, Nevada, New Jersey, New York, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Washington, Wisconsin, and Wyoming as well as Washington D.C., we strongly support legislation to create an independent Consumer Financial Protection Agency (“CFPA”). Our review of the regulatory approaches at the existing agencies, whose jurisdiction includes but does not focus on consumer financial products, leads us to conclude that on balance they place a higher value on protecting the interest of financial product vendors who promote complex debt instruments using aggressive sales practices, than they do on protecting the interests of consumers in transparent, safe, and fair financial products. An independent agency with consolidated authority and a consumer-oriented mission such as the one being considered by your committees is likely to improve public confidence in the safety and efficiency of the vast consumer financial products marketplace—a marketplace that includes complex and nonstandard mortgage instruments, promissory notes, installment sales agreements, credit cards, debit cards, Internet payment devices, and other devices, products, and services in the consumer financial system. It is a system vitally important to public welfare and economic recovery.

The desirable improvements and consolidations proposed to be accomplished by this legislation include (1) a single place to concentrate federal rulemaking authority over consumer financial transactions joined with primary enforcement authority over them; (2) the power to restore banking federalism so as to better accommodate consumer interests; (3) the authority to improve opportunities for consumers to enforce their rights; and (4) the ability to establish standards for fairness and honesty in agreements for financial products and services. These improvements intrinsically cannot be accomplished through the existing agency structures, or practically are not achievable through them. Several difficulties presented by the existing regime and which are addressed through the proposed changes are documented in the scholarly literature, which is illustrated below.