Financial Services Firms Face Critical Need for Representation

Posted on December 14, 2010. Filed under: Uncategorized |

Financial services companies large and small need eyes and ears in Washington as the Obama administration sets about review of some 3,300 regulations on everything from mortgages to credit cards.

Elizabeth Warren, the Obama administration adviser responsible for setting up the Consumer Financial Protection Bureau, has made clear that the operative word in the new organization’s name is “consumer.”

She has expressed outrage that Wall Street banks are making profits and paying their executives huge bonuses while consumers are not seeing similar benefits from America’s nascent recovery.

“This just staggers me; I mean, I just don’t have words to describe what this means,” she said in an interview for Bloomberg Television’s “Conversations With Judy Woodruff.”

“For me, what an economic recovery is about is about what happens to American families. It’s what happens in the real economy. It’s whether or not families are building up wealth in their homes or whether or not their homes are dragging them over an economic cliff,” she said.

Though she is just now in the process of setting up the bureau, it was made clear in the enabling legislation that its powers will be broad. For the financial services sector, keeping tabs on the bureau’s progress and exercising as much influence as possible through Congress and the administration is critical.

Some in Congress are worried that the bureau, and Warren herself, are planning too much new regulation that could harm the industry by forcing it to comply with overly burdensome regulations. She has suggested, for example, that credit cards be required to carry a sort of warning label, ala the Food and Drug Administration, to make terms and conditions clear to consumers.

But Warren also says that the concerns of the banking industry will not be lost on the bureau in its zeal to protect consumers.
“We want to level the playing field by streamlining regulations and eliminating outdated or ineffective rules. We want to make it easy for banks—large and small—to meet their obligations to their customers and to make the costs and risks of credit clear,” she wrote in an Op-Ed published recently in Politico.

She has said, for example, that the bureau’s recommendations could benefit financial companies by prompting changes in the labyrinthine process they must follow to meet federal disclosure rules. Under the Truth in Lending Act and the Real Estate Settlement Procedures Act mortgage companies must provide borrowers with vast amounts of information.

“What if we dump both of those forms and in its place we have a one-page mortgage shopping sheet that gives the consumer the key information that the consumer needs?” she said. “They overlap by about 80 percent in terms of content, but because they use different terms, they have to be calculated in different ways, so they’re costly for the banks to fill out.”

So there could be a silver lining for financial services firms in this otherwise worrisome regulatory storm.

Either way, the industry needs to protect its interests through aggressive representation as the regulatory landscape is rewritten.

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